India's largest IT services exporter has turned in a decent set of numbers for its third quarter. While the numbers themselves are more or less in-line with market expectations, why did the shares of TCS hit a 52-week high on the bourses? The company, of course, released its numbers after the markets closed for trading.
With TCS sitting out a run-up in share prices for the first few quarters, it has made up in the last quarter or so, as markets seem to have read a few signs. The fast growing, high margin digital revenues today stand at 22.1 per cent accounting for more than USD 4 billion in revenues, which is a growth of nearly 40 per cent, year on year. This is the single biggest positive news coming out of the numbers released today.
While the company still gets the bulk of its revenues from traditional services, which are facing pricing pressures, the pace of growth in digital has been impressive.
Also the third quarter is traditionally considered soft because of the number of holidays in key global markets that Indian IT players typically serve. Attrition has come down. While there has been some pressure on margins the company seems to have held on to its 25 per cent plus margin bracket, though going forward this is the metric markets will watch closely.
Rajesh Gopinathan, the CEO and MD of TCS pointed out that Europe is likely to become its second largest market after the US, sometime in the next four quarters. There has been turnaround in the retail vertical and the company has added 34 clients and the market seems to have factored in all that. However, the single biggest takeaway has been the impressive growth in digital business, which finally seems to be delivering.