TCS sees softness in long-term deals after second-quarter beat

Many of India's top IT services firms are looking at various cost-cutting measures, as they are worried that tightening budgets at recession-wary US and European clients will sharply hit their profits

Tata Consultancy Services Ltd said it was seeing some softness in long-term deal decision making after India's top IT exporter reported a bigger-than-expected rise in second-quarter profit on Monday.

The Mumbai-based company's order book for July-September stood at $8.1 billion, consisting of several small- and medium-sized deals rather than large ones, TCS said.

Many of India's top IT services firms are looking at various cost-cutting measures, as they are worried that tightening budgets at recession-wary U.S. and European clients will sharply hit their own profits after a pandemic-led boom.

"Europe is a very uncertain environment," Chief Executive Rajesh Gopinathan told a press conference.

 

"(We) have to wait and see how the winter pans out ...if there are production cuts that will roll across multiple industries," he said.

The company said its order book in the United Kingdom and Europe were stronger sequentially in the second quarter, but warned there could be some "softness" in deal closures in Europe.

TCS is the first among its peers to report quarterly results, setting the tone for the industry, which has been benefiting from a pandemic-led boom in demand.

TCS also said its quarterly annualised attrition has peaked in the second quarter and expects it to "taper down from this point, while compensation expectations of experienced professionals moderate.

The company's net profit rose 8.4% to Rs 10,431 crore ($1.27 billion) in the three months ended Sept. 30 from a year earlier.

Analysts on average had expected a profit of Rs 10,244 crore, according to Refinitiv data.

Revenue from operations rose 18% to Rs 55,309 crore.

($1 = 82.3940 Indian rupees)