TCS meets estimates with double-digit revenue, profit growth; announces $2.4 bn buyback

Tata Consultancy Services (TCS), the largest technology services firm in the country, met street estimates with a double-digit rise in both revenue and profit for the third quarter and announced a large buyback programme worth Rs 18,000 crore ($2.4 billion).

The company posted revenue of Rs 48,885 crore for the quarter ended December 31, 2021, up 16.3% from a year earlier and marking a growth of 15.4% in constant currency terms.

Net profit rose 12.3% to Rs 9,769 crore over the corresponding period last year.

Analysts were expecting 12-16% growth in revenue as well as net profit for the quarter.

Meanwhile, the cash-rich IT behemoth announced a buyback programme at a price of Rs 4,500 a share. This is nearly 13% premium to the last traded share price.

TCS share price skid 1.5% to close at Rs 3,857.25 apiece on Wednesday. The firm announced financial results after trading stopped for the day.

Other key highlights

1) Growth was led by retail and consumer packaged goods (20.4%), financial services (17.9%) and the manufacturing vertical (18.3%).

2) Technology and services grew 17.7%; life sciences and healthcare grew 16.3%; communications vertical grew 14.4%.

3) Among major markets, growth was led by North America (18%) and continental Europe (17.5%) while UK grew 12.7%.

4) Among emerging markets, growth was led by Latin America (21.1%) and India (15.2%), followed by Middle East and Africa (6.9%) and Asia Pacific (4.3%).

5) The firm had 58 clients in $100 million-plus bucket, up 10 from a year earlier.

6) The company’s operating margin at 25% declined 1.6% from a year earlier.

7) TCS announced a dividend of Rs 7 a share.

8) Net headcount addition of 28,238 takes total workforce strength to 556,986.

Management commentary

Rajesh Gopinathan, CEO and Managing Director, said: “Our continued growth momentum is a validation of our collaborative, inside-out approach to our customers’ business transformation needs. While mapping out their innovation and growth journeys, we are also helping them execute new-age operating model transformations to support those journeys.”

N Ganapathy Subramaniam, the company’s COO, said: TCS continued its focus on growing organically and on developing the talent, methodologies, and toolkits for an ever-evolving technology landscape.

“This, coupled with our contextual knowledge and the passion and commitment of thousands of TCSers enabled us to deliver cutting-edge solutions during the quarter, and help our clients realize speed to value. We are also delighted to cross another important milestone in our journey, hitting the $25 billion revenue mark in CY 2021,” Subramaniam said.

Finance chief Samir Seksaria said sustained investment in talent helped TCS power strong growth despite a challenging supply environment.

“We remain focused on long-term talent development as well as on tactical measures to mitigate the talent churn. We have exercised various operating levers in Q3 to mitigate the higher costs and manage our employee expense,” Seksaria said.