Tata Consultancy Services, the country’s biggest listed company in terms of market capitalisation, reported a record quarterly profit in October-December and signalled a strong deal pipeline going into the new year.
Kicking off the earnings for the software services industry, the IT bellwether said quarterly profit surged 24 per cent year-on-year to Rs 81.05 billion. Revenue for the December ending quarter was up 21 per cent from a year ago to Rs 373.38 billion. Third quarter is usually a weak quarter for software exporters, given the holiday season in major markets like North America and Europe.
In constant currency terms, revenue grew 12.1 per cent, which was the highest in 14 quarters, said Rajesh Gopinathan, MD and CEO of TCS.
The growth was largely driven by the continued momentum in the BFSI (banking, financial services and insurance) vertical, where revenue rose 8.6 per cent year-on-year, compared to the 6.1 per cent growth it had reported in the second quarter. The other major contributor was digital, where revenue jumped 52.7 per cent from a year ago and now contributes to 30.1 per cent of the Mumbai-based company’s total revenue.
Even as the overall global economy is expected to slow down marginally in 2019, TCS remains bullish on the deal pipeline.
“We had both, strong order closure in the third quarter, as well as strong pipeline build up. How does that pipeline translate into closure, we will see, but our pipeline, qualified pipeline, aggregate pipeline, everything is building up nicely. So, the demand outlook is quite strong,” Gopinathan told reports in an interaction.
Apart from BFSI, revenue from energy and utilities vertical gained 18.1 per cent, and life sciences and healthcare saw 15.7 per cent growth. Communications and media vertical as well as retail, too, reported near 11 per cent growth, respectively in the third quarter.
Among the key geographies, revenue from the UK was up 25.1 per cent, Europe revenue gained 17.6 per cent and Asia Pacific revenue grew 12.6 per cent. North America, India and Latin America saw 8.2 per cent, 9.7 per cent and 7.6 per cent growth, respectively.
“Almost all the verticals, if you look at the growth, across the board you will find very strong, either double-digit or trending to double-digit growth... If you look at it from a geography market perspective, emerging markets are volatile, but the major markets, there we are seeing strong opportunities,” said Gopinathan.
In the backdrop of a strong demand outlook, the company also continues to increase its headcount steadily. TCS added 6,827 employees in the third quarter and had a total employee strength of 417,929 at the end of December on a consolidated basis.
“From the last third quarter to this third quarter, on the whole we have added about 27,000 net...I see, given the kind of demand that we have, the kind of pipeline that is there, our hiring is going to remain strong and we are hiring pretty strong as far as the US market is concerned and major markets is concerned. This particular year, the total net addition we have done in the US is the highest we have ever done in the US,” said Ajoy Mukherjee, global head of human resources at TCS.
The company says it has now trained 292,000 employees on digital technologies and over 318,000 employees in agile methods. Its IT services attrition currently stands at 11.2 per cent.
TCS’ earnings will set the tone for the rest of the sector. Its Bengaluru-based rival Infosys will report its third quarter results on Friday. On Thursday, before TCS announced its earnings, its shares closed up 0.02 per cent at Rs 1,888.15 on the BSE.