TCS Q3 profit jumps 7% YoY to Rs 8,701 cr, announces dividend at Rs 6/share

IT major Tata Consultancy Services on Friday posted a 7.18 per cent year-on-year (YoY) rise in its December quarter (Q3FY21) profit at Rs 8,701 crore. The firm had posted a profit of Rs 8,118 crore in the same quarter last year (Q3FY20).

On quarter-on-quarter (QoQ) basis, the profit grew 16.4 per cent from Rs 7,475 crore posted for the quarter ended  September 2020 (Q2FY21).

The number beat Street estimate which was factoring-in a 3-8 per cent year-on-year (YoY) growth in Q3 net profit. ICICI Direct, for instance, had projected a 5.7 per cent YoY jump in PAT. 

The September quarter net profit had a post-tax one-time impact of Rs 958 crore due to provision for ongoing litigation with EPIC, the company said in a press release.

The company's revenue came in at Rs 42,015 crore, up 5.42 per cent YoY and 4.68 per cent QoQ. TCS' revenue stood at Rs 39,854 crore in the corresponding quarter last year and Rs 40,135 crore in the preceding quarter of FY21.

The revenue rose by 4.1 per cent QoQ and 0.4 per cent YoY in constant currency terms. In dollar terms, revenue grew at 5.1 per cent sequentially from $ 5.424 billion reported in Q2FY21. The firm said it was the strongest third quarter growth in 9 years.

Nirmal Bang Institutional Equities had expected TCS to deliver CC revenue growth of 4 per cent QoQ and dollar revenue growth of 4.5 per cent QoQ. "Being the market leader, TCS will be a key beneficiary of core transformation, higher cloud adoption and digital adoption. Moreover, it is a direct beneficiary of the persistent market share loss of key players such as Capgemini and Cognizant," the brokerage had said in an earnings preview note. CLICK HERE TO READ ANALYSTS' EXPECTATIONS

Further, TCS announced third interm dividend of Rs 6 per share. The Tata Group firm said it has fixed January 16 as the record date to determine the eligible shareholders.

Commenting on the Q3 performance, Rajesh Gopinathan, Chief Executive Officer and Managing Director of the company said: "Growing demand for core transformation services and strong revenue conversion from earlier deals have driven a powerful momentum that helped us overcome seasonal headwinds and post one of our best performances in a December quarter. We are entering the new year on an optimistic note, our market position stronger than ever before, and our confidence reinforced by the continued strength in our order book and deal pipeline."

On the operational front, its earnings before interest and tax (EBIT) grew by 6.4 per cent sequentially to Rs 11,184 crore and the operating margin for Q3 grew 1.6 per cent YoY and 0.4 per cent QoQ to 26.6 per cent. Meanwhile, the net margin for the quarter under review stood at 20.7 per cent.

"Strong growth across all our verticals, and operational benefits from our SBWS model allowed us to post the highest operating margin in the last five years, even after rolling out a salary increase this quarter. We also had an all-time high cash conversion in Q3. This and our strong balance sheet position us very strongly to seize the opportunities that the current market offers, and more closely partner our customers in their growth and transformation journeys," said V Ramakrishnan, Chief Financial Officer of TCS. 

TCS' consolidated headcount stood at 469,261 as of December 31, 2020 while its IT services attrition rate (LTM) was at 7.6 per cent, its lowest ever.

Segment-wise revenue distribution

All verticals showed good sequential revenue growth, led by Manufacturing (+7.1%), BFSI (+2%), Life Sciences and Healthcare (+5.2%), Communications & Media (+5.5%) and Retotil otnd CPG (+3.1%), the company said. On a YoY, constant currency basis, Life Sciences and Healthcare continued to grow in double digits at 18.2%. BFSI (+2.4%) and Technology & Services (+2.4%) also moved into positive territory, it added.

Geography-wise, sequential growth was led by North America (+3.3 per cent), India (+18.1 per cent), UK (+4.5 per cent), and Continental Europe (+2.5 per cent). Other markets grew as well, with and Asia Pacific growing +2.6 per cent, MEA +6.7 per cent, and Latin America +3.1 per cent, the company said in a press release.

In anticipation of a strong performance, shares of the company had ended the day 2.89 per cent up at Rs 3120.35 on the BSE on Friday.

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