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TCS Manages A Mere 8% Profit Growth, Blames Tepid Global Economy: Results Analysis


tcs-logoThe Indian IT giant, TCS, has reported weak growth numbers. The company reported revenue growth at 7.80% and profit growth of 8.37% YoY. The Indian IT sector has been slowing down and TCS is falling in line with that. The management had already given a thumbs up and has warned to expect a low growth from the company for the current quarter.
Key Take Aways:

  • 40.37% of their revenue for the current quarter was generated by Banking and Financial Services, Insurance (BFSI) clients. The YoY revenue growth from BFSI clients is at 7.49%. While their is no growth in BFSI client revenue, if we look at QoQ numbers.
  • USD Revenue up by 0.3% QoQ and 5.2% YoY.
  • Business Growth slow down was observed in American and European market.
  • Operating Margin declined from 27.06%  for Q2 last year to 26.01% for the current reported quarter.
  • Employee addition down by 10% on half yearly basis, compared with same duration last year.
  • Employee cost has gone up 2%. For the current quarter employee cost attributed to 52.17% of the revenue, where as for the same quarter last year, it was at 50.14%.
  • Employee attrition rate down by 11.9%.
  • Their other income increased by about 55% YoY.

The CEO said:

It has been an unusual Q2 for TCS. Growing uncertainties in the environment is creating caution among customers, and resulted in holdbacks in discretionary spending in this quarter. In addition, volatility in markets like India and Latin America also muted revenue growth.

It’s not apparent what market volatility we saw in Q2 in India, but the statements about lower discretionary spends and caution are noted by other IT giants like Cognizant as well. Infy comes out with results on Friday and we must see what they offer as well.
TCS shares closed at Rs 2328.50, having dropped by 2%.. Results were declared post market hours.


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