Tata Consultancy Services, India’s largest software services company on Thursday reported 5.7 percent sequential rise in net profit in its fourth quarter to Rs 6,904 crore, beating analyst expectations. The company's third quarter profit was at Rs 6,531 crore.
EBIT margin for the quarter was 25.4 percent, up 20 basis points sequentially. In absolute terms it was 4.7 percent higher sequentially at Rs 8,147 crore.
FY18 full year EBIT margin came in at about 24.77 percent. This was about 93 basis points lower than the previous year. Of this, the company said 70 basis points had come due to currency impact and 20 bps from wage hikes and other elements. The company had forecast the full year EBIT margin at 26-28 percent.
Revenue for the quarter rose 3.8 percent sequentially to Rs 32,075 crore for the quarter ended March 31, 2018. The revenue for the December quarter was Rs 30,904 crore.
Full year revenue grew 4.35 percent over last year to Rs 123,104 crore. Full year net profit, however, was about 1.8 percent lower at Rs 25,826 crore.
Dollar revenue in Q4 was Rs 4,972 million compared to Rs 4,787 million in the preceding quarter, a drop of 3.86 percent.
Board approved bonus of 1 share for every share held, and a final dividend of Rs 29/share.
Analysts polled by Reuters had estimated Q4 net profit of Rs 6,811.8 crore. and revenue of Rs 31,669.2 crore.
The revenue growth in constant currency terms was at 2 percent. FY18 volume growth was 7.6 percent while revenue growth was 6.7 percent in constant currency terms.
Digital revenue grew 42.8 percent year-on-year (YoY) to 23.8 percent.
"Strong demand in digital & large deals have made Q4FY18 best in many years," said CEO Rajesh Gopinathan in a media briefing to announce the results. He highlighted the company has managed to win the largest possible deals at a time when perception was that large deals are hard to come by. "We have structured some of the most innovative deals this industry has seen," he noted.
Ganapathv Subramaniam, Chief Operating Officer & Executive Director said, "Six of our industry verticals grew above company average in FY18; 4 in double-digits."
"We are executing on our Business 4.0 strategy and that Is paying off very well," Subramaniam said in the result statement.
All industry verticals - with the exception of BFSI- grew above company average, with three verticals growing in double digits YoY. Growth was led by the energy & utilities vertical (+33.7 percent), travel & hospitality (+25.4 percent) and life sciences & healthcare (+12.6 percent).
Continental Europe (+19.1 percent), UK (+10.7 percent) and Asia Pacific (+8.6 percent) led the growth. North America grew 4.9 percent YoY. The company sees strong growth prospects from APAC although they acknowledge it is a diverse market.
Attrition in IT services during the quarter stood at 11 percent, 0.1 percent lower than 11.1 percent in the March quarter. The total attrition rate (including BPS) fell to 11.8 percent. Total employee strength at the end of Q4 stood at 394,998 on a consolidated basis.
Reacting to the result, IDBI Capital said in a note, the exit rate for revenue growth in Q4FY18 augurs well for improvement in growth in FY19. We remain confident on TCS delivering good improvement in YoY organic revenue growth among large-caps.
Sanjeev Hota, AVP Research, Sharekhan by BNP Paribas said TCS has maintained margins guidance target band of 26-28 percent for FY19E, led by revenues recovery. Accelerated growth is seen in digital. Given a low base of revenue growth of 6.7 percent in FY18, we expect acceleration in growth in FY19/20E and coupled with currency reset, it will drive the earnings upgrades
Unlike Infosys, the second largest IT services exporter, TCS does not give quarterly or annual forecast.
Infosys last week posted revenue forecast largely in line with analyst estimates but forecast margin growth below analysts’ expectations.
TCS shares ended 1 percent higher Rs 3,190.65 per share on the BSE on Thursday.
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