5 Things To Know about TCS’ Q4 Results

by CXOtoday News Desk    Apr 17, 2015

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In one of the largest-ever employee bonus payouts in India’s corporate history, IT major Tata Consultancy Services (TCS) has announced a Rs 2,628 crore one-time bonus to its employees, to mark 10 years of its public listing. At a recent press meet announcing the company’s Q4 results, CEO-MD Natarajan Chandrasekaran observed that the March quarter had been a weak one, even though the firm had reported growth of 11.5 percent annually and 8.5 percent sequentially.

Here some key takeaways from TCS’ Q4 results:

1. The landmark one-time bonus

The company said it will give a one-time bonus to all eligible employees to mark the 10th anniversary of its initial public offer or IPO. TCS will give one week’s salary for every year of service rendered. The move will cost the company $423 million or Rs 2,628 crore, as mentioned earlier.

TCS employs 3.19 lakh consultants worldwide and it said that employees who have completed at least one year in service will be eligible to receive the one-time bonus. The company also announced an average salary hike of 8 percent for its employees in India. Overseas employees will get an average hike of around 2-4 percent and top performers will get upto 10 percent hike.

Chandrasekaran states that the special reward to employees acknowledges the role they have played in building TCS into one of the most respected and valued technology services companies in the world.

Read more: TCS Inches Closer To IBM As World’s Biggest IT Employer

2. Growth, despite fall

The company reported a net profit of Rs 3,858 crore for the March quarter, down 27 percent on an annual basis and 29 percent in sequential terms. If the cumulative bonus payout of Rs 2,628 crore to employees isn’t factored in, profit for the quarter stands at Rs 5,905.9 crore, growth of 11.5 percent annually and 8.5 percent sequentially. Revenue for the quarter was Rs 24,219 crore rose 12.4 percent on a year-on-year basis and a fall of 1.1 percent sequentially. In dollar terms, revenue grew 1.6 percent on a constant currency basis.

The company just met the top-end of Nasscom’s growth range estimate of 13-15 percent for FY15, said it would ‘aspire’ to beat the FY16 estimate. The industry body has said it expects growth of 12-14 percent for the current financial year.

3.  Riding on Digital waves

TCS’ revenue reflected on its digital efforts for the first time. It said revenue from software-as-a-service platforms grew 55% in the year to $125 million. This includes offerings such as mobility solutions, cloud and analytics, which have contributed significantly to the company revenues. Ninety percent of its cloud-based revenue came from its own platforms. The company has said it expects digital revenue to contribute $3-5 billion in revenue in the next few years.

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“We are living in a world where technology is not just becoming integral to business but to our daily lives. TCS is playing a leading role in this ongoing revolution, helping our clients navigate and leverage Digital to help grow their businesses. Our deep relationships with our customers, our domain expertise and strong rigor in operations have helped us continue to show growth leadership in FY15,” said Chandrasekaran.

Read more: TCS Sees $5-Bn Opportunity In Digital Business

4. New markets, deals and client additions

 The company said it has won nine large deals across five verticals in the quarter. The number of clients who contribute more than $100 million to revenue increased by four. Clients contributing more than $50 million and more than $20 million was up by three each

The company’s growth seemed to be the strongest in Europe, followed by the US and the UK. TCS also showed a strong presence in Asia, especially on its acquisition of the Mitsubishi (tech) of Japan. It also showed strong growth in most verticals, except energy and telecom units owing to continued market volatility.

5. Need to check attrition

The company’s attrition rose to 14.9 percent this quarter. The company attributed this to improving demand in the IT sector. HR head Ajoyendra Mukherjee told ET that TCS is taking every step to bring down its attrition level which has become very high.

According to Rajesh Gopinathan, Chief Financial Officer, TCS, “We have maintained our profitability in a challenging operating environment, where currency has been a strong headwind for some time. Despite these and other macro challenges, our goal has been to support business growth while ensuring we continue to invest in a calibrated fashion for the future.” 

“We have laid a strong foundation for growth in FY16. Our investments in Platforms, Digital and Automation are gaining traction with clients and together with our market investments in USA, Europe and Japan, we are upbeat that the coming quarters will bring more opportunities to partner with customers across multiple industries. We remain focused on remaining relevant to our customers, our employees and the community,” summed up Chandrasekaran.