TCS growth marginal in tough Q3

Global headwinds, currency volatility and Chennai floods resulted in marginal growth sequentially for IT major Tata Consultancy Services (TCS) in third quarter of this 2015-16.

Though the software major reported on Tuesday 12 percent growth in net profit at Rs.6,110 crore for the quarter under review over the same period last year, sequentially it is flat at 0.9 percent from Rs.6,055 crore posted in second quarter.

Similarly, revenue for Q3 grew 11.7 percent to Rs.27,364 crore but only 0.7 percent sequentially from Rs.27,165 crore in Q2 under the Indian accounting standard.

Under the International Financial Accounting Standard (IFRS), net income grew six percent to $926 million and revenue 5.5 percent to $4.15 billion, same as in second quarter in net and gross income.

"In constant currency, revenue growth was 0.5 percent in rupee and 1.1 percent in dollar terms sequentially," the city-based company said in a statement here after the stock markets closed for the day.

Traditionally a weak quarter for the services sector, the company's sequential growth was accentuated by the impact of floods in Chennai, where it has a large software development centre.

The company had forewarned ahead of the earning season that its growth and margins would be hurt by the floods, as 65,000 techies work at its Chennai delivery centre.

"Our international business, however, grew well in constancy currency, with North America and Europe leading the way among major markets and Latin America," said TCS chief executive N. Chandrasekaran.

The outsourcing major's blue chip scrip declined Rs.38.95 when trading closed on the BSE to Rs.2,324.05 per share of Re.1 par value from Monday's closing rate of Rs.2,363 and opening price of Rs.2,367.

Growing four percent sequentially, digital business contributed 13.7 percent to the overall revenue, though number of $100 million clients increased by just one to 34 and $20 million by two to 173.

"Digital will remain the core focus for enterprise IT in 2016, as our customers respond to competition in a global economy driven by real-time insights. We are playing a significant role in digital business," Chandrasekaran added.

Admitting that the quarter was challenging due to cross currency and other headwinds, chief financial officer Rajesh Gopinathan said growth was holistic in all industry segments, with life sciences and healthcare, manufacturing and hi-tech leading the way.

"Europe and North America led growth in major markets while Latin America and Asia Pacific led the growth markets. Among service lines, infrastructure services and BPS (business process services) were leaders," he said.

Exit of 13,047 techies in the quarter led to net addition of 9,071 employees though 22,118 were hired, taking headcount to 344,691 by December 31.

"Our efforts to retain employees is working as the quarterly attrition rate fell to 15.9 percent, while utilisation excluding trainees was 84.9 percent and 80.9 percent, including trainees," said TCS global head for human resources Ajoy Mukherjee.

The company has applied for 2,536 patents, including 99 in third quarter, while 302 patents have been granted so far.