TCS results: Covid chips net-profit but company upbeat on learning, dividends, customers, and operational resilience

Source :Sify
Author :Sify
Last Updated: Thu, Jul 9th, 2020, 21:10:06hrs
TCS

Mumbai: Tata Consultancy Services on Thursday announced the results for the quarter ending June 30, 2020. The company also announced a dividend for its investors.

TCS posted revenues of Rs 38,322 crores, marginally better than the revenues of Rs 38,172 crores earned in the first quarter of 2019-20. In the March 20 quarter, the company earned revenues of Rs 39,946 crores. Total incomes for the quarter ending June were reported at Rs 38,920 crores as against Rs 40,684 crores in the March'20 quarter.

The company's press release opened with the headline 'TCS demonstrates operational resilience while positioning for growth recovery' with a slightly narrower sub-headline revealing a '6.6 percent degrowth in YoY revenues'.

The company had hinted of recovery from Covid to begin from the third quarter of FY21.

Commenting on the Q1 performance, Rajesh Gopinathan, Chief Executive Officer and Managing Director, said: "The revenue impact of the pandemic played out broadly along the lines we had anticipated at the start of the quarter. It affected all verticals, with the exception of Life Sciences and Healthcare, with varying levels of impact. We believe it has bottomed out, and we should now start tracing our path to growth."

Revealing the positives, Gopinathan added, "After an initial period of disruption, customers have now stabilized their operations and are now embarking on new beginnings to adapt and thrive in a post-pandemic world. We are seeing many customers focus on front-end transformation, resulting in significant traction for our products and services. The other big investment themes are around driving operational resilience, adaptability and optimization. We signed several large core transformation programs encompassing operations, applications, cloud and cybersecurity. Our Machine First approach, delivered using the Secure Borderless Workspaces™ model is helping us win such opportunities. Very encouragingly, we saw customers launch new business transformation programs or restart deferred programs during the quarter. This is indicative of business confidence returning in pockets."

key highlights are as follows:

1. Revenue at Rs 38,322 crores, 0.4% YoY growth.

2. constant currency revenue growth: -6.3% YoY

3. Net Income at Rs 7,008 crore, -13.8% YoY

4. Operating Margin at 23.6%; Net Margin at 18.3%

5. Net Cash from Operations at Rs 9,290 crore ie 132.6% of Net Income

6. Consolidated headcount: 443,676 with 36.2% women

7. 353K+ employees trained in new technologies

8. Industry-leading talent retention: IT Services attrition rate at 11.1% LTM

9. Dividend per share: Rs 5.00.

10.Record date 17/07/2020; Payment date 31/07/2020

TCS' operating expenses including employee benefits, cost of equipments, depreciation and amortisation, and other expenses remained approximately similar with other quarters. The company reported operating expenses for the quarter at Rs 29,274 crores slightly lower than Rs 29,921 crores in March'20 quarter and higher than Rs 28,952 crores in the June'19 quarter.

Although Covid-19 has been blamed for the company's marginally lower revenues and net-profits, the company reported that most employees adhered to work from home standards and meeting the learning outcomes. The company's HR head is reported of claiming a 28 percent jump in learning activity over the previous quarter. TCS has also deployed a location-independent way of working and only 1 percent of employees were reported of working from the corporate facilities.  

In its release, the company while elaborating on learning activities observed, "TCS' continued investments in organic talent development and focus on upskilling have resulted in industry-leading outcomes. TCSers logged in 7.9 million learning hours in Ql, a 28% increase over the prior quarter. Over 353,000 employees have been trained on multiple new technologies, and over 417,000 have been trained on Agile methods."

N Ganapathy Subramaniam, Chief Operating Officer & Executive Director, said: "The locationindependent way of working is gaining traction. Our customers are quite comfortable integrating the

remote workforce, using new collaborative technologies to get work done. Our Secure Borderless Workspaces model has been institutionalized. We have been able to seamlessly adapt and extend it to prospect for new business, sell, contract and execute programs."

V Ramakrishnan, Chief Financial Officer, said: "We have taken a supportive approach to employees and vendors, and used other efficiency levers to limit the impact of the sharp revenue decline during the quarter, and still delivered an industry-leading operating margin. Disciplined execution resulted in superior cash conversion and a strong cash balance that positions us very well to weather the downturn."

The company also shared sectoral and geographical highlights. Among industries, Life Sciences & Healthcare continued to grow strongly at 13.8% YoY. "Other than that, all

other industry verticals showed declines of varying degrees: BFSI (-4.9%), Retail & CPG (-12.9%), Communications & Media (-3.6%), Manufacturing (-7.1%) and Technology & Services (-4%). Banking, Financial Services and Insurance remains the main-stay of the company's earnings with Rs 15,282 crores or nearly 40% of the earnings coming from this vertical in the current quarter. In the previous quarter, BFSI services contributed Rs 15,207 crores. Rs 14,978 crores was contributed during June'19 quarter.

Demand in the Indian market slumped according to the data points shared by TCS. "Demand contraction was broad-based by geography. Other than Europe (+2.7%) and Latin

America (+0.2%), growth declined in all other markets: North America (-6.1%), UK (-8.5%), India (-27.6%), Asia Pacific (-3.2%), and MEA (-11.7%," said the release.

The company has announced a dividend of Rs 5 per equity share of Rs 1 each.

The TCS quarter report includes financial statements for 53 entities including C-Edge, CMC Americas, and several prominent subsidiaries. 1.19 lakh shares of TCS exchanged ownership, according to the BSE, on Thursday. The news was announced post trading hours with the scrip trending down by 13.30 points or 0.60 percent to Rs 2204.35 per share. On the NSE, shares of TCS closed 6.40 points or 0.29 per cent lower at Rs 2,212.