)
India's largest IT services provider Tata Consultancy Services (TCS) delivered its second quarter numbers that were steady and consistent in performance but disappointed the street as it missed expectations.
The company managed to hold its ground and reported an organic volume growth of 6.1%. The volume growth of 6.1% was excluding Mitsubishi. The Japan joint venture added another 2.8%.
Though the company managed to deliver a better set of numbers compared to last quarter it disappointed the street. For instance revenue growth for the quarter came in at 7.4% on a sequential basis but on a constant currency basis it was at 4.6%, almost similar to the quarter ended June.
The dollar revenue grew at 6.4% for the Q2, when the street was expecting this to be in the range of 7.3-8%.
"I think the street is disappointed as second quarter is generally a strong quarter. Compared to the estimates our numbers are soft due to three reasons-we continue to see softness in our insurance vertical, though retail has done well in absolute growth terms we could have done better, and thirdly Latin America has see a degrowth of 4.8%. All this impacted our growth," said N Chandrasekaran, CEO & MD, TCS while addressing the media.
For the second quarter TCS reported net profit of Rs 5,288 crore up 13.6% year-on-year and 4.5% on sequential basis. Revenue grew 13.5% at Rs 23,816 crore on a year-on-year basis.
| Consolidated Financial Results | |||||
| Quarter Ended | |||||
| Rs Crore | Sep-30 | Jun-30 | Sep-30 | YoY | QoQ |
| 2013 | 2014 | 2014 | %chg | %chg | |
| Total Income | 20,977.24 | 22,111.03 | 23,816.48 | 13.53 | 7.71 |
| Total Expenses | 14,672.16 | 16,175.97 | 17,465.29 | 19.04 | 7.97 |
| Other Income | -25.71 | 787.15 | 662.63 | - | -15.82 |
| Finance Cost | 12.67 | 8.67 | 66.49 | 424.78 | 666.90 |
| Tax | 1,594.65 | 1,598.65 | 1,635.06 | 2.53 | 2.28 |
| Net Profit | 4,633.33 | 5,567.68 | 5,288 | 13.19 | -5.81 |
| Source:BSE Press Release | |||||
| Compiled by BS Research Bureau | |||||
In terms of geographies US, UK, Europe and India grew well along with major industries and verticals. North America grew 5.3%, UK reported growth of 3.8%, India was back on growth track with 9% and Asia Pacific grew strong by reporting a growth of 43.2%.
It is second quarter in line where TCS has reported a slow growth rate in its biggest vertical banking financial services and insurance. "India is back on growth track. We are seeing good demand from private sector. The BFSI segment is weak primarily due to softness in insurance that too only in UK. We see this softness for a couple of quarters," said Chandrasekaran.
During the quarter TCS added four $50 million accounts and nine in the $20 million category. The company signed eight large deals, five came from the US, Europe contributed two and UK added one.
TCS managed to hold its operating margins at 26.8%. Rajesh Gopinathan, Chief Financial Officer, said, "We remain focused on supporting business growth by optimizing our operations and maintaining margins in our desired range. Our cash generation has been strong resulting in high cash conversion ratios and we continue to make investments for the business growth."
During the quarter TCS added a total of 20,350 (gross) employees and net hiring of 8,326 taking its total headcount to 313,757. The utilisation rate (excluding trainees) was at 86.2% and that including trainees was 81.3%. The attrition rate (LTM) was at 12.8% including BPS.
"Diversity of talent remains a key source of strength for the organization and during the quarter, we crossed the milestone of having 100,000 women professionals in our workforce," said Ajoy Mukherjee, Executive vice president and Global Head, Human Resources. "Our hiring plan for FY15 is on track as we continue to build a talent pipeline in line with business demands."
On Thursday, the company stock on BSE closed 0.8% lower at Rs 2,678 per share but this was before the quaterly numbers were announced.
ALSO READ: TCS to merge subsidiary CMC
