Mumbai, Oct 8 (PTI) TCS kicked off the Q2 earnings season for India Inc on Thursday, reporting a 15 per cent jump in net profit to Rs 13,884 crore and pointing to continued growth momentum going forward.
The country’s largest IT services company, the biggest source of revenues for Tata Sons, posted a net profit of Rs 12,075 crore in the year-ago period and Rs 13,349 crore in the preceding September quarter.
The company said its revenue from operations rose 11.22 per cent to Rs 73,188 crore in the July-September period from Rs 65,799 crore in the year-ago period. In the June quarter, its topline stood at Rs 72,275 crore.
About 10 per cent of overall revenue came from the artificial intelligence (AI) front, where the company upped annualised revenue to USD 3.1 billion from USD 2.6 billion in the quarter-ago period, Chief Executive K Krithivasan said in an analyst call.
For the reporting quarter, growth has been broad-based, Krithivasan said, adding that looking at the pipeline, deal signings and client conversations, he is confident of the growth momentum to continue.
Its chief operating officer Aarthi Subramanian said AI revenues are growing at the fastest pace in the banking, financial services and insurance, manufacturing and life sciences verticals.
From a new deal signing perspective, it reported a total contract value of USD 9.6 billion for the July-September period, marginally up from the USD 9.5 billion a quarter ago.
TCS chief financial officer Samir Seksaria said the profit margins on the AI deals are higher than the company’s average. It reported the overall operating margin at 24 per cent, the same level as in the quarter-ago period.
Seksaria made it clear that even as the company continues to aspire to take the number to beyond 26 per cent over the long term, it will continue investing for the future.
Refraining from giving a profit margin target in the near term, he also pointed to challenges in the second half of FY27 on hits coming through acquisitions.
In Q2, there was a greater reliance on subcontracting of work in some markets, which was driven partly by its decision not to apply for H-1 B visas in the key market of the US, and also by meeting skill requirements.
TCS added 4,258 employees in the last three months on a net basis to take its overall staff strength to 5,98,056 as of September 30, and the attrition in the IT services vertical stood at 13.3 per cent.
Its chief human resources officer Sudeep Kunnumal said it is hiring talent with an eye on the demand environment and will continue to hire resources.
It onboarded 10,000 freshers in Q2 in addition to the 14,000 done in Q1, he said.
Energy, resources and utilities business revenues grew 5.7 per cent year-on-year on a constant currency basis, making it the fastest-growing segment among all sectors. The consumer business declined 1 per cent.
Its largest market North America delivered a 1.5 per cent growth in revenues on a constant currency basis, while India was the fastest-growing region at 6 per cent.
However, India revenue fell by 10 per cent quarter-on-quarter, which was attributed to project deferment in a deal by Krithivasan. The company is confident of revenue from the particular deal accruing in the future, he added.
The company board recommended a dividend of Rs 12 per share, with October 14 as the record date.
“AI is now a meaningful line. But constant-currency growth was only 0.5 per cent on-quarter. So, AI is likely replacing or cannibalising traditional work rather than adding net new revenue. Whether it expands the pie or just re-labels existing revenue is the key question,” analysts at the brokerage firm, Mirae Asset Sharekhan, said.
Ahead of the results, the TCS scrip closed 0.42 per cent down at Rs 2,075.25 apiece on the BSE, as against a 1.44 per cent correction on the benchmark. PTI AA BAL
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