TCS Q1 net profit inches up 2%; revenue below street estimate

The largest software exporter TCS today reported a meagre 2.1 per cent growth in its June quarter net profit at Rs 5,684 crore, with revenue growth trailing street expectations on difficulties from the Japanese and Latin American markets.

The city-headquartered software major reported a consolidated revenue of Rs 25,668 crore under Indian Gaap accounting, which is up 16.1 per cent on yearly basis and 6 per cent sequentially.

Under the IFRS system, revenue grew 3.5 per cent sequentially to USD 4.03 billion, slower than the street's 4 per cent estimate.

The Tata Group company, which is the first major player to report its June quarter earnings, faced difficulties in the Japanese and Latin American markets, and also from its British acquisition Diligenta, resulting in a shortfall of up to USD 25 million.

Managing director and chief executive N Chandrasekaran said but for this shortfall, revenue growth would have touched the street estimate of 4 per cent.

A dip of 1.30 per cent in realisations also ate into revenue during the quarter, he said, clarifying that the dip is not on account of pricing, which was flat.

He said Diligenta will take a few more quarters to revive, while in Japan it is in the process of integrating with its local partner Mitsubishi which is taking time.

Stating that key markets like North America are doing good, Chandrasekaran said telecom and energy businesses will continue to be under pressure for some more time due to sectoral issues. The media sector also has some sluggishness, he added.

During the reporting quarter, TCS added 10 clients in the USD 20-million plus band, and one each in the USD 50-million and USD 100-million range, he said, adding revenue from the key geography North America grew 4.3 per cent and the key sector banking and financial services grew 6 per cent.

Analysts at the brokerage Motilal Oswal Securities said the revenue growth is lower than its expectation and maintained its neutral call on the stock.

Ahead of the earnings announcement which came after the market hours, the TCS counter plunged 2.80 per cent at Rs 2,521.40 on the BSE whose main gauge Sensex shed 0.41 per cent.

Leave Your Comment(s)