TCS Q2 Financial Results: Broad-based Demand, Resilient Margins Power Strong Earnings Growth

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TCS Q2 Financial Results: Broad-based Demand, Resilient Margins Power Strong Earnings Growth

Tata Consultancy Services (BSE: 532540, NSE: TCS), the leading global IT services, consulting and business solutions organization, reported its consolidated financial results according to Ind AS and IFRS, for the quarter ending September 30, 2021.

Highlights of the Quarter Ended September 30, 2021

  • Revenue at $6.333 Bn, +16.8% YoY; +15.5% CC YoY
  • Operating Margin at 25.6%; +0.1% QoQ, -0.6% YoY
  • Net Income at $1.301 Bn, +14.0% YoY | Net Margin at 20.5%
  • Strong Client Addition: 5 New Clients (total: 54) in $100Mn+; 17 new clients (total: 114) in $50Mn+ 
  • Net Cash from Operations at $1.344 Bn ie 103.3% of Net Income
  • Net headcount addition of 19,690 |Workforce strength: 528,748
  • Diverse and inclusive: Women in the workforce: 36.2% | 157 Nationalities
  • Building a G&T workforce: 417K+ employees trained in new technologies | 26K+ Contextual Masters identified | 6,900+ Elevate graduates
  • Best in class talent retention: LTM IT Services attrition rate at 11.9%; lowest in the industry 
  • Dividend per share: ` 7.00 | Record date 19/10/2021 | Payment date 03/11/2021

Rajesh Gopinathan, Chief Executive Officer and Managing Director, said: “The strong and sustained demand environment is a once-in-a-decade opportunity to position ourselves as the preferred growth and transformation partner for our customers. We are using the growth tailwind to invest in strengthening relevant capabilities and building out a comprehensive portfolio of offerings that caters to a broader set of stakeholders in the enterprise across business cycles, strengthening our brand, and making our business more resilient. We believe this is the most sustainable pathway to create longer term value for all our stakeholders.

N Ganapathy Subramaniam, Chief Operating Officer & Executive Director, said: “We are pleased with our overall delivery performance during the quarter, where several large complex programs across verticals went live, thanks to the passion, energy, and commitment of our people. These include programs such as contact-less payments, card-less withdrawal of cash from ATMs for leading banks, space-range-display transformation for retailers, one of the largest application transformations to public cloud native architecture, all leveraging our automation led G+T framework, agile methods and toolkit. Our products and platforms, TCS BaNCS®, Quartz SmartLedgers™, TwinX™ and TCS Cognix™, all had marquee wins during the quarter and are increasingly driving business and operating model transformations in many markets.”

Samir Seksaria, Chief Financial Officer, said: “Strong growth and disciplined execution helped us overcome headwinds from currency and supply-side inflation and deliver expanded margins. Our industry-leading profitability and strong cash conversion give us the wherewithal to make the right investments needed to build out the business of the future.

Q2 Segment Highlights**

Industries:  All verticals showed strong, double-digit YoY growth. Growth was led by the Manufacturing vertical (+21.7%), followed by Life Sciences and Healthcare (+19%), Retail and CPG (+18.4%) and BFSI (+17%). Communications & Media (+15.6%) and Technology & Services (+14.8%) witnessed accelerated growth. 

Markets: All major markets showed strong growth, with growth led by North America (+17.4%). UK grew (+15.6%), and Continental Europe grew (+13.5%). Among emerging markets, growth was led by India (+20.1%), followed by Latin America (+15.2%), Middle East & Africa (+13.8%) and Asia Pacific (+7.6%). 

Services: Q2 saw strong demand for growth and transformation services as customers took a longer-term view of their businesses, driven by improving vaccination levels and business outlook. There was broad-based growth for services around cloud, enterprise application services, analytics and IoT.

  • Consulting & Services Integration:  Continued to deliver strategic transformation programs and provide outcomes-focused thought leadership for client pursuits and deliveries. Key offerings driving growth this quarter were Supply Chain and NextGen Enterprise Transformations.
  • Digital Transformation Services: Growth this quarter was led by Enterprise Application Services, Analytics & Insights and Internet of Things. Enterprises continue to invest in growth and transformation programs, and the focus remains on building digital platforms of the future. Growth for Enterprise Application Services was led by e-Commerce and customer experience, supply chain, and human capital management solutions leveraging SAP S/4HANA and Salesforce. IP-led offerings in Analytics and Insights, such as DATOM™, DAEzMo™ and Decision Fabric™ saw strong resonance. TCS Bringing Life to Things™ is emerging as a key enabler in the connected enterprise initiatives of marquee customers. Next-Gen asset life cycle management, vehicle engineering, and digital thread are key themes driving the demand for Engineering and IoT services.
  • Cloud Platform Services: Continued to see traction for core application migration services, workplace services and modernization initiatives leveraging cloud native development. TCS was recognized as Google Cloud’s 2020 Breakthrough Partner of the Year in Q2.
  • Cognitive Business Operations: TCS Cognix™ and MFDM™ powered 5 very large deal wins by driving digital transformation of operations. Data Center, Network and F&A services led the growth. Cognix™ continues to make strong strides, with the installed base crossing 150, helping customers improve business agility, user experience, operational resilience, and operational efficiency. 

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