TCS Q2 net up 1.8% at Rs 8,042 cr; announces special dividend of Rs 40/sh

Tata Consultancy Services (TCS) on Thursday posted 1.8 per cent year-on-year (YoY) rise in its net profit at Rs 8,042 crore for the second quarter (July-September) of the financial year 2019-20 (FY20). On a sequential basis, the numbers slipped 1.09 per cent. The IT major had posted profit of Rs 8,131 crore in June quarter and Rs 7,901 crore in the year-ago period. 

Revenue in constant currency (CC) terms grew 8.4 per cent YoY, while revenue in rupee terms came in at Rs 38,977 crore, up 5.8 per cent YoY. Revenue in US dollar terms came in at $5,517 million. The numbers missed analysts' estimates.

Analysts at ICICI Securities, for instance, had forecast revenue in US dollar terms to grow 7 per cent YoY and 1.8 per cent QoQ to $5,581 million. 

"In rupee terms, TCS is expected to post a sales growth of 6.4 per cent YoY to Rs 39,225.8 crore. On QoQ basis, the numbers are expected to rise by 2.8 per cent. EBIT is estimated at Rs 9,950.2 crore, up 1.8 per cent YoY and 7.9 per cent QoQ while net profit is seen at Rs 8,266.7 crore, up 4.6 per cent YoY and 1.7 per cent QoQ. EBIT margin, on the other hand, is expected to fall by 115 bps YoY to 25.4 per cent. On QoQ basis, it is expected to increase by 121 bps," the brokerage had said. 

Profit margin and business highlights

Operating margin (OPM) for the quarter under review stood at 24 per cent, while net margin came in at 20.6 per cent. Earnings Per Share (EPS) stood at 21.43, up 3.8 per cent YoY, the company said in its press release. Further, TCS also announced special dividend of Rs 40 per share and an interim dividend of Rs 5 / share.

Revenue from digital segment grew 27.9 per cent YoY. Life Sciences & Healthcare grew 16 per cent YoY while Communications & Media grew 11.8 per cent. Geographical-wise, UK business grew 13.3 per cent YoY while business from Europe increased 16 per cent YoY. The company added 14,097 employees during the period, its highest ever in a quarter. IT Services attrition rate stood at 11.6 per cent LTM (last twelve months).  

"We ended the quarter with steady growth despite increased volatility in the financial services and retail verticals. We remain confident as the medium and longer term demand for our services continues to be very strong, as evidenced by our Q2 order book - the highest in the last six quarters," said Rajesh Gopinathan, TCS' chief executive officer and managing director. 

"Digital disruption across multiple industries is making rapid, scalable innovation a critical imperative in the Business 4.0 world. In the auto sector, our scale in advanced engineering R&D skills and depth in digital technologies like Al and loT are making us the preferred innovation partner to leading OEMs, embedding us deeply into their product R&D value chain. Our strategic partnership with -General Motors for their next generation mobility initiatives is a powerful illustration of this," Gopinathan added.

Segment-wise numbers

TCS Q2 segment-wise