TCS runs into tepid quarter, expects improvement in next two quarters

The country's biggest IT software company Tata Consultancy Services on Thursday reported a lower-than-expected 8.4 per cent rise in net profit at Rs 6,586 crore for July-September but said its next two quarters would be better.

Describing the second quarter as an extremely unusual one for the company, TCS managing director and chief executive N Chandrasekaran said, ``I expect the Q3 and Q4 to be better than the similar quarters in the past many years and also the first two quarters as we expect most of the delayed project orders in Q2 to materialise in the second half.''

The consolidated revenue of the company grew nearly 8 per cent to Rs 29,284 crore for the quarter up from Rs 27,165 crore in July-September 2015.

He also said that the company expects to maintain margins, which jumped 130 bps to 26 per cent in the reporting quarter to be in the range of 26 to 28 per cent through the rest of the current year. The company's revenue growth was the lowest sequential revenue growth in the company's reporting history in the second quarter, a Emkay Global report pointed out.

TCS first warned in September that its financial sector clients were holding back on discretionary spending.

TCS Chief Executive N. Chandrasekaran said the second quarter was "unusual" for the company, but that he was optimistic. He gave no reason, but said there had been no order cancellations and technology spending continued. He also said the company had not seen much impact from the forthcoming US elections.

The United States is the biggest market for India's $150 billion software services outsourcing industry, followed by Europe.

The report said the IT sector continued to face structural and cyclical changes resulting in a very tough financial year for the industry as a whole.

The company has said it will push into digital services such as big data, cloud computing, and artificial intelligence among other things, as it seeks to expand beyond its traditional business and boost revenues.

During the September quarter, TCS said it added one client contributing annual revenues of more than $50 million, and six in the $20 million-plus band.

It had gross employee additions of 22,665 during the quarter, taking its total to 371,519.

Ahead of the results shares in TCS, valued at nearly $70 billion, fell 2.2 percent in a Mumbai market that closed 1.6 percent lower. The company is India's biggest by market capitalisation.

TCS' closest rival Infosys Ltd is due to report quarterly results on Friday.

Incidentally, Chandrasekaran's optimism comes amidst the uncertainties about the outcome of the forthcoming American presidential polls scheduled for November 8 wherein the Republican hopeful Donald Trump has threatened to end outsourcing and put up many trade protectionist measures if elected to the White House.

In association with Mail Today Bureau