July 10, 2018

TCS reports robust start to FY19 with BFSI turnaround

  • Net profit growth of 23.5 percent YoY
  • Revenue grows +15.8 percent YoY; 6.8 percent QoQ1
  • Constant Currency Revenue growth at +9.3 percent YoY; 4.1 percent QoQ
  • North America growth highest in 12 quarters

MUMBAI: Tata Consultancy Services (BSE: 532540, NSE: TCS), the leading IT services, consulting and business solutions firm, reported its consolidated financial results according to IndAS and IFRS as on June 30, 2018.

Financial highlights for quarter ended June 30, 2018

  • Revenue at Rs34,261 crore; +15.8 percent Y-o-Y, and 6.8 percent Q-o-Q
  • Net income at Rs7,340 crore; +23.5 percent Y-o-Y, and +6.3 percent Q-o-Q
  • Operating margin at 25 percent
  • Net cash from operations at 103.7 percent of net profit
  • Earnings per share at Rs19.17 up 26.1 percent YoY; Dividend per share of Rs4.00

Proposed record date 18/07/18; Payment date 25/07/18

Business highlights for quarter ended June 30, 2018

  • BFSI vertical growth accelerates; +4.1 percent YoY; +3.7 percent QoQ
  • North America rebounds on BFSI and retail recovery; +7 percent YoY; +3.7 percent QoQ
  • Digital revenue at 25 percent, up 44.8 percent Y-o-Y
  • Two new clients in $100M+ band, 13 clients added in $5M+ band sequentially
  • World’s largest Agile-ready workforce; 242,000+ employees Agile trained
  • Total employees; 400,875; IT services attrition rate at 10.9 percent LTM

Commenting on the Q1 performance, Rajesh Gopinathan, CEO and MD, said, “We are starting the new fiscal year on a strong note, with the growth engine firing on all cylinders. Our banking vertical recovered very nicely this quarter, while other industry verticals maintained their momentum. With a good set of wins during the quarter, a robust deal pipeline and accelerating digital demand, we are positioned well for the future.”

Mr Gopinathan added, “Customers across verticals and markets are embracing our Business 4.0 thought-leadership framework and accelerating their digital transformation journeys. Our contextual knowledge, full spectrum capabilities and investments in research and innovation are making us their preferred partner for their growth and transformation initiatives.”

N Ganapathy Subramaniam, CEO and executive director, said, “It has been an excellent quarter, with broad-based growth across all segments and good client additions. We are seeing strong demand in areas like cloud transformation, cyber-security and data privacy, and automation. Our investments in forward-thinking doctrines like the Machine First Delivery Model (MFDM™) and Location-independent Agile are giving customers immediate, measurable business benefits and speed to market.

V Ramakrishnan, chief financial officer, said, "Disciplined execution, accelerating growth and currency support helped us mitigate the impact of wage increases during the quarter. This strong start gives us greater confidence in our ability to get our operating margin to our preferred range, while continuing to fund the digital investments that are differentiating us in the marketplace.”

Q1 Segment Highlights2

Industries: Revenue growth accelerated in BFSI (+4.1 percent) and retail and CPG (+12.7 percent) in Q1. Growth was led by the energy and utilities vertical (+30.9 percent).
Markets: North America bounced back growing +7 percent, while UK (+18.7 percent), Continental Europe (+18.6 percent), and Asia Pacific (+10.8 percent) led the growth.
Services: Business and technology services had a strong quarter with several key deal wins and a healthy pipeline across all service lines.

  • Consulting and Services Integration: Experienced strong growth driven by greater traction of transformative business solutions combining technologies, process and contextual knowledge. Enterprise Agility Services continued to gain strong adoption by customers.
  • Digital Transformation Services: All services saw strong growth and a healthy pipeline, as customers navigate the complexities of digitally re-imagining their business. Q1 saw strong demand for Cloud advisory and migration services, Cyber-security including GDPR, Identity and Access Management and Managed Security Services, Intelligent Process Automation, TCS Enterprise Cloud Platform, Interactive services, IoT and Analytics services.
  • Cognitive Business Operations: TCS’ Machine First Delivery Model (MFDM™) which reimagines conventional delivery by giving machines the first right of refusal on new workloads, saw greater adoption among customers.

Q1 Key Highlights

Consulting and Services Integration

  • Chosen as a strategic partner for the transformation of Mitsubishi Corporation’s global network architecture, an initiative to enhance operational efficiencies and business excellence, spanning multiple geographies and approximately 150 offices worldwide.
  • Selected by a leading UK retailer as a strategic partner to digitally transform operations and drive greater business agility, by implementing a portal leveraging a suite of micro services and optimising their supplier network through a new Supplier Master Data Management solution.
  • Expanded the partnership with M&G Prudential to deliver enhanced services for its UK savings and retirement customers, bringing the total number of policies managed by TCS to 5.8 million.
  • Chosen by a leading American aviation company in the US to improve its operations by leveraging the power of Analytics, as part of an IoT Digital Thread and Digital Command Center initiative to overcome silos and provide an integrated business view across multiple business units.
  • Selected by Euroclear Finland, the financial industry’s trusted provider of post trade services, to transform and modernise its core legacy systems by deploying TCS BaNCS and significantly upgrading its issuance and post trade services.
  • Engaged by a prominent North American airline as a strategic partner to enrich its customer experience by designing and building advanced analytics labs and a security infrastructure for effective security configuration and improved performance.

TCS Interactive

  • Chosen by a leading Canadian financial institution as a leading digital partner to improve its employee experience by reimagining their workplace management and collaboration processes.
  • Selected by an American multinational shipping and logistics company as a strategic partner to design and develop a next generation digital network planning tool to optimise service across their product lines.

Enterprise Applications, Cloud Services and Security

  • Engaged by a global gas supplier as the transformation partner for a large multi-year hybrid cloud engagement, including hosting and managing their IT infrastructure leveraging TCS Private Cloud.
  • Chosen by a European steel manufacturer to provide improved visibility and control of their cloud applications by implementing a Cloud Access Secure Broker solution with GDPR compliance.
  • Selected by a leading UK airline to deliver a smart order management solution and superior digital shopping channel experiences by implementing an Azure Cloud based solution.
  • Engaged by a travel and logistics company in the US to create a new Digital Workplace through a design-centred transformation initiative leveraging Office 365 and SharePoint.

Automation and Blockchain

  • Engaged by Keysight, an American electronics test and measurement equipment manufacturer, to transform their IT landscape using Intelligent Automation and our Machine First Delivery Model, leveraging ignioTM – the world’s first cognitive automation solution for enterprise IT – as a key differentiator.
  • Selected as a strategic partner by Woolworths Group, a leading Australian retailer, to enable business operational excellence and efficiency by leveraging TCS' contextual knowledge and intelligent automation solutions.
  • Chosen by a multinational aerospace and transportation company to drive greater efficiency across their value chain by deploying intelligent automation solutions.
  • Engaged by a leading Canadian bank to improve the transparency of its customer information by implementing a Blockchain solution to synchronise client insights across multiple businesses.

IoT and Analytics

  • Engaged by a prominent bank in the US to empower its financial crime group with cognitive intelligence and anti-money laundering processes by integrating the bank’s Analytics platform with an advanced search engine tool.
  • Selected by a leading aircraft manufacturing firm in the US to transform its data landscape in line with its Enterprise Strategy for 2025 – by enabling advanced analytics, integration of machine data and cloud migration.
  • Chosen by a top British Port group to provide operational visibility and establish safety compliance by effectively tracking field assets, leveraging IoT enabled sensing technology.

Products and Platforms

  • TCS’ products and platforms continued to gain traction in the market place with 8 wins for the TCS BaNCS suite, 2 wins for Advanced Drug Discovery platform, and 7 wins for ignio.

Research and Innovation

  • TCS’ flagship innovation event, the TCS Innovation Forum 2018 was held at four locations – New York, Mexico City, London and Edinburgh. Hundreds of customers, ecosystem partners and influencers got together with TCS’ Research and Innovation teams to brainstorm around the theme of ‘Innovation driven Business 4.0’.
  • At the 13th edition of Tata Innovista 2018, the TCS team won five distinct awards across multiple award categories.
  • TCS Research won the first place for Best modelling results predicting the microstructure within an as-built 15-5 bridge structure at the AM-Bench 2018 Benchmark Challenge conducted by the National Institute of Standards and Technology (NIST), USA.

As of June 30, 2018, the company has applied for 3,978 patents, including 62 applied during the quarter, and has been granted 715 patents.

Human Resources

Total employee strength at the end of Q1 crossed the 400k mark and stood at 400,875 on a consolidated basis. The percentage of women in the workforce rose further to 35.6 percent, while the total number of nationalities represented grew to 143.

The company’s strategy of organic talent development resulted in a cumulative 11 million learning hours, and training of over 264k employees in digital technologies, and over 242k employees in Agile methods. The IT Services attrition rate (LTM) fell further by 0.1 percent in Q1 to 10.9 percent, while the total attrition rate (including BPS) fell to 11.7 percent.

Ajoy Mukherjee, executive vice president and global head, human resources, said, “We continue with our investments in upgrading the technology skills of our people, while leveraging their contextual knowledge and domain experience. This has resulted in not only a very nurturing and dynamic work environment, but also a strong digital solutioning capability that delivers differentiated outcomes for our customers.”

1 YoY: Year on Year; QoQ: Quarter on Quarter. Growth rates in constant currency unless specified otherwise.

2 Growth figures in constant currency, and YoY