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Bengaluru : India’s largest software services exporter Tata Consultancy Services (TCS) reported a 5% year-on-year increase in net profit to ₹11,909 crore in the second quarter, driven by the rampup of its ₹15,000-crore deal with state-owned telco Bharat Sanchar Nigam Ltd (BSNL) while clients in the key markets of America and Europe remained cautio us with their technology spends.
CEO K Krithivasan cited “some signs of improvement, most notably in financial services in North America,” acknowledging that the “demand outlook continues to remain cautious”, on an analyst call after earnings were announced. A planned press conference was cancelled due to the death of Ratan Tata.
“Stability in the macro brings initial signs of confidence with the easing of interest rate… consumer confidence and industry confidence will get better. This can potentially lead to improved investment,” said Krithivasan, signalling that the second half of FY25 could be better and that the industry, which has been grappling with an unprecedented slowdown in demand, could emerge from the shadows of macroeconomic uncertainty.
On a sequential basis, net profit fell 1%, mostly due to margin-dilutive work outside the Americas. On the revenue front, TCS surpassed ET estimates and posted consolidated revenue of Rs 64,259 crore, up 7.6% from a year ago and 2.6% sequentially. The BSNL deal lifted India sales by 95% from the year earlier as its largest market of North America declined 2.1% and the UK was up 4.6%.The company announced a second interim dividend of Rs 10 per equity share, to be paid on November 5. TCS shares ended marginally lower (0.6%) at Rs 4,228.40 on the BSE, while the Sensex closed up 0.2%. In the last three months, TCS shares have risen 8%.
The company said that there are now over 600 AI and GenAI engagements deployed successfully in production or in various phases of development. TCS had said its AI and GenAI pipeline grew to $1.5 billion in the April-June period from $900 million in the March quarter. Without mentioning numbers, Krithivasan said the AI and GenAI pipeline was doubling every quarter.
TCS said it added three large clients in the quarter. The number of clients that contributed over $100 million to revenue went up to 66 from 63 in Q1 of this fiscal. Its order book was slightly higher at $8.6 billion of total contract value (TCV) compared with $8.3 billion in the June quarter.
Margins shrank for the second quarter in a row, to 24.1% from 24.7%. Analysts had expected TCS to derive higher revenue contribution from BSNL, which has a pass-through component, that would limit the firm’s margin expansion.
“Key business themes seen across industries were cost optimisation, vendor consolidation, customer experience transformation, supply chain modernisation, risk and resiliency,” Krithivasan said. “Globally, clients continue to prioritise efficiency through cost transformation programmes… Financial institutions in the US are looking at sustaining the growth momentum with the Fed first rate cut in four years.”
TCS said that growth was led by energy, resources and utilities (7.0%) as well as manufacturing (5.3%). Markets such as India, the Middle East and Africa (+7.9%), Asia Pacific (+7.5%), Latin America (+6.8%) were above the company’s average.
The stock market has been upbeat about IT after Accenture raised its FY25 guidance and sentiment improved following the US Federal Reserve’s interest rate cut last month. ET has been reporting on industry expectations for an improved second half as hiring and demand show signs of a pick-up after a deep lull. HCLTech will report earnings on October 14 and Infosys and Wipro on October 17.
HEADCOUNT GROWS
The IT giant added 5,726 employees in the second quarter, continuing net employee addition from the previous quarter. Total employee count at the end of September was 612,724, up from 606,998 in the June quarter. Attrition marginally increased by 20 basis points sequentially to 12.3% in the September quarter. A basis point is 0.01 percentage point.
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