MUMBAI: Tata Consultancy Services (TCS) turned in disappointing Q1 results on Thursday. The country’s largest software exporter saw its consolidated net profit plunge 10 per cent sequentially and 5.9 per cent annually, widely missing Street estimates.
A strong rupee and steep employee costs dragged Q1 net profit to Rs 5,945 crore, down from Rs 6,608 crore registered in the previous quarter and Rs 6,317 crore witnessed during the corresponding quarter last year.
TCS is the largest Indian IT services firm with over 3.8 lakh employees as of June 2017 and the affect of rising employee costs is evident. During the June quarter, salary bill shot up by Rs 535 crore over the previous quarter, largely due to annual wage hikes. But V Ramakrishnan, CFO, TCS said they will ‘remain disciplined’ in financial management and in generating strong cash flows.
“During the quarter high currency volatility including a sharp rupee appreciation against the dollar resulted in the Rs 650-crore loss in reported revenue.” Revenue growth, too, fell marginally by 0.2 per cent to Rs 29,584 crore. But, it grew 3.1 per cent in dollar terms to $4.6 billion. Operating income fell 9.3 per cent to Rs 6,914 crore from the previous quarter.
The rupee appreciated 0.6 per cent against the dollar during the quarter under review. According to Crisil, a rise in the rupee would dent exporters’ profit by 2-3 per cent.
“We have had an excellent win across all markets and have a good deal pipeline across industries that position us well for growth in FY18,” said Rajesh Gopinathan, CEO & MD, TCS. “We have seen steady growth across industries in Q1.
Robust volumes from major markets driven by good client additions across revenue bands and accelerating digital adoption among customers have given us the right start to the year.”
While the company maintained there won’t be any job losses, Ajoyendra Mukherjee, EVP and head, global human resources, said overall hiring will be lower than last year. “Hiring as a focus this year is going to be less than last year and we will be concentrating on training.”