TCS meets revenue expectation but marginally misses Q4 profit growth

Tata Consultancy Services (TCS), the largest technology services firm and the second most valued firm in India, met street estimates with a double-digit rise in revenue but marginally missed profit forecasts for the fourth quarter.

The company posted revenue of Rs 50,591 crore, up 15.7% year on year, and reported a growth of 14.3% in constant currency terms in the three months ended March 31, 2022.

Net profit rose 7.4% to Rs 9,926 crore over the corresponding period last year.

Analysts were expecting revenue of just over Rs 50,000 crore while they were hoping to see profit north of Rs 10,000 crore in Q4.

Meanwhile, the cash-rich IT behemoth said its board has recommended a final dividend of Rs 22 a share. This comes after the company announced a buyback program worth Rs 18,000 crore at a price of Rs 4,500 a share, nearly 13% premium to the last traded share price, in January.

Shares of TCS rose 0.26% to close at Rs 3,696.4 apiece on Monday, in a weak Mumbai market. The firm announced financial results after trading stopped for the day.

Other Key Highlights

1) Growth was led by Retail and consumer packaged goods vertical (22.1%), manufacturing vertical (19%) and communications and media (18.7%).

2) Technology and services vertical grew 18% and life sciences and healthcare grew 16.4%. BFSI grew 12.9%.

3) Among major markets, growth was led by North America, which grew 18.7% and UK, which expanded 13%. Continental Europe grew 10.1%.

4) Among emerging markets, Latin America grew 20.6%, Middle East and Africa (7.3%), India (7%) and Asia Pacific grew (5.5%).

5) The company’s operating margin stayed flat at 25% as expected.

6) TCS announced a final dividend of Rs 22 a share.

7) Net headcount addition of 35,209, taking total workforce strength to 592,195.

Management Commentary

Rajesh Gopinathan, Chief Executive Officer and Managing Director, said: “We are closing FY22 on a strong note, with mid-teen growth and adding the maximum incremental revenue ever. Increasing participation in our customers’ growth and transformation journeys, and an all-time high order book provide a strong and sustainable foundation for continued growth ahead.”

N Ganapathy Subramaniam, Chief Operating Officer of TCS, said the company closed the year with broad-based growth, industry-leading margins and the highest ever order book.

“During the year, we took on technologically challenging, industry-first transformational programs and brought to bear the full power of TCS’ capabilities and that of our partner ecosystem, to successfully deliver market-changing outcomes,” he said.

Samir Seksaria, Chief Financial Officer, said TCS continued to make all the investments needed to support growth and also managed the headwinds this year to deliver an industry-leading operating margin yet again.

“The successful completion of our fourth buyback in five years is another milestone in our shareholder-friendly approach to capital allocation,” he said.