TCS Rides Sustained Digital Services’ Demand to Report Strong Quarter

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India’s largest software exporter Tata Consultancy Services announced a $2.4 billion (roughly Rs. 17,740 crore) share buyback Wednesday after reporting strong quarterly earnings, boosted by sustained demand for its digital services.

Net profit at the IT giant rose more than 12 percent to Rs. 9,769 crore in the three months to December 31, above analysts’ expectations, compared to the same period last year.

Strong demand across business segments pushed third-quarter revenue growth to its highest in five years, increasing more than 16 percent year-on-year to Rs. 48,885 crore, the Mumbai-headquartered company said.

“We’ve had an exceptional quarter,” chief executive and managing director Rajesh Gopinathan said in a media briefing following the results announcement.

“In the calendar year ’21, we have now hit the 25-billion-dollar-revenue mark. Most importantly, the growth came with continuingly industry-leading profitability.”

The country’s second-most valuable firm by market size announced it will buy back shares worth 180 billion rupees at a price of Rs. 4,500 per share.

This represents a 16.67 percent premium to Wednesday’s share closing price of Rs. 3,857.

Operating margins fell marginally to 25 percent, compared to 25.6 percent in the previous quarter, impacted by an increased focus on hiring and retaining talent.

TCS said it hired 28,823 new employees in the quarter, even as employee attrition – a key metric for IT companies – inched up to 15.3 percent from 11.9 percent in the previous quarter.

TCS was at the forefront of an IT boom that saw India become a back office to the world as firms in North America and Europe subcontracted work, taking advantage of a skilled English-speaking workforce.

The company earns more than 80 percent of its revenues from its Western markets outside of India.

Overseas growth at TCS was led by North America, which contributes half of its total business and saw revenue growth of 18 percent year-on-year.

Revenues from Europe, the United Kingdom and Latin America grew 17.5, 12.7 and 21.1 percent respectively, compared to the year-ago quarter.

TCS won new orders worth $7.6 billion (roughly Rs. 56,190 crore) in the quarter, 12 percent higher than orders worth $6.8 billion (roughly Rs. 50,275 crore) signed in the previous quarter.

The board also approved an interim dividend of Rs. 7 per share for shareholders.

Shares of TCS closed 1.5 percent lower in Mumbai ahead of the release of the results.


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