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TCS Q1 PAT up 28.5% YoY; India enterprise down 14.1% attributable to second wave

Tejas Networks bags multi-year contract from Asia Consultancy Group

Tata Consultancy Services (TCS) missed Street’s expectations as its India business detracted from revenue growth in the first quarter of FY22. India business for the country’s largest IT service provider fell 14 percent as the second wave of Covid19 affected business sentiment.

For the first quarter, the company’s net income grew 28.5 percent year-over-year to Rs 9,008 billion, but declined 2.5 percent sequentially. Revenue for the quarter rose 18.5 percent year-over-year to Rs.45,411 billion and was up 3.9 percent from the previous quarter. According to Bloomberg poll, analysts estimated sales of Rs 45,767.5 billion and net income of Rs 9,391.9 billion for the past quarter.

In dollar terms, the company’s revenue grew 2.5 percent to $ 6.15 billion, a bit below analysts’ expectations of 3.5 to 4 percent growth.

Operationally, the company continued to show robust growth. For the quarter, TCS reported a total order value of $ 8.1 billion. The signing of the contract was driven by growth in all regions and industries.

Rajesh Gopinathan, CEO and MD, said: “In a quarter that was personally challenging for many, TCS managed to report a balanced quarter. While we saw strong growth in the core markets, we saw challenges in emerging countries like India ….. our customer growth in all areas has grown this quarter. Rather, the customer growth has exceeded the level before Covid. “

The India business was hit when the cloud-based iON service survived the second wave of Covid. Some of the public sector projects, including the Passport Seva Kendras, were affected.

“TCS results were below our estimates. The company is monitoring the Covid situation and its impact on growth. We assume that the impact on sales in India will reverse in the coming quarters. We therefore expect an improvement in sales and expect the company to achieve double-digit sales growth in FY22E. This, coupled with a healthy deal pipeline and robust margins, allows us to be positive on the stock from a longer-term perspective. We would review our estimates and target price shortly, ”said the first cut note from ICICI Direct Research.

TCS recorded growth in all regions and industries. Life Sciences and Healthcare continued to lead growth with sequential increases of 7.3 percent and 25.4 percent, respectively, over the previous year. Retail and Consumer Goods (CPG) also rebounded, growing 4.4 percent sequentially and 21.7 percent year-over-year. BFSI grew 3.1 percent sequentially and 19.3 percent year-over-year, manufacturing 4.8 percent sequentially and 18.3 percent year-over-year, technology and services 5 percent sequentially and 12.3 percent year-over-year, and communications and media 1.7 percent sequentially 6.9 percent compared to the previous year.

Geographically, North America grew 4.1 percent sequentially, the UK 3.6 percent, continental Europe 1.5 percent, Latin America 4 percent, and the Middle East and Africa 4.2 percent. The second wave of the pandemic affected growth in India, declining 14.1 percent sequentially. Asia-Pacific grew 2.4 percent sequentially.

TCS has also passed the 500,000 mark in its total workforce. With 509,058 employees, TCS reported a fluctuation of 8.6 percent. While the turnover rate is the lowest among the competition, it is up 7.2 percent in the last quarter. For the first quarter, the company added 20,409 net employees.

Milind Lakkad, Chief HR Officer, explained the Covid19 vaccination campaign at TCS, saying that over half a million employees and family members and over 70 percent of employees had been vaccinated in less than two months. “We are well on the way to vaccinating all TCSers and families by September,” said Lakkad.

DD Mishra, senior research director at Gartner, said the company is reorganizing itself and changing its operating model to meet market demands. ” We have succeeded in controlling fluctuation and providing stability, which is a good indicator of a stable organization. “

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