Mumbai: The largest software exporter TCS Thursday reported a meagre 2.1 percent growth in its June quarter net profit at Rs 5,684 crore, with revenue growth trailing street expectations on difficulties from the Japanese and Latin American markets.
The city-headquartered software major reported a consolidated revenue of Rs 25,668 crore under Indian Gaap accounting, which is up 16.1 percent on yearly basis and 6 percent sequentially.
Under the IFRS system, revenue grew 3.5 percent sequentially to USD 4.03 billion, slower than the street's 4 percent estimate.
The Tata Group company, which is the first major player to report its June quarter earnings, faced difficulties in the Japanese and Latin American markets, and also from its British acquisition Diligenta, resulting in a shortfall of up to USD 25 million.
Managing director and chief executive N Chandrasekaran said but for this shortfall, revenue growth would have touched the street estimate of 4 percent.
A dip of 1.30 percent in realisations also ate into revenue during the quarter, he said, clarifying that the dip is not on account of pricing, which was flat.
He said Diligenta will take a few more quarters to revive, while in Japan it is in the process of integrating with its local partner Mitsubishi which is taking time.
Stating that key markets like North America are doing good, Chandrasekaran said telecom and energy businesses will continue to be under pressure for some more time due to sectoral issues. The media sector also has some sluggishness, he added.
During the reporting quarter, TCS added 10 clients in the USD 20-million plus band, and one each in the USD 50-million and USD 100-million range, he said, adding revenue from the key geography North America grew 4.3 percent and the key sector banking and financial services grew 6 percent.
Analysts at the brokerage Motilal Oswal Securities said the revenue growth is lower than its expectation and maintained its neutral call on the stock.
Ahead of the earnings announcement which came after the market hours, the TCS counter plunged 2.80 percent at Rs 2,521.40 on the BSE whose main gauge Sensex shed 0.41 percent.
Pre-tax margin was down by 0.65 percent at 26.2 percent, impacted largely by an industry leading wage hike, chief financial officer Rajesh Gopinathan said, adding currency benefits and operational efficiencies helped reduce the impact.
In spite of the wage hike and a Rs 2,628-crore bonus doll-out to employees, the company reported a spurt in attrition at 15.9 percent, which was attributed by its global human resources head Ajoy Mukherjee to seasonal movement where workers leave to pursue higher education and also due to effects of the past three quarters.
Chandrasekaran also played down the attrition level saying this is not a major cause of concern as the company is confident of getting it down in the next few quarters through various measures like the plan to train 1 lakh employees in digital skills.
The company hired 20,302 people in the reporting quarter, while the net addition stood at 5,279 employees, taking its total headcount to 3.24 lakh.
On the digital front, Chandrasekaran said it now accounts for around 12.5 percent of its overall revenue and also added that the company is set to surpass its target of netting USD 5 billion in revenues from the upcoming segment in the next five years.
The company added 38 key clients in the segment and has become the fastest growing segment for the company, he said. On the domestic business, Chandrasekaran said revenue grew 3 percent and the company continues to remain invested in the market because of the potential.
Global worries like Greece and China will not impact the company, Chandrasekaran said, adding its revenue from Europe were up 19 percent over the year ago period.
