Firm European demand fails to lift profits at India’s TCS

TCS (Photo: Dhiraj Singh/Getty Images).
TCS (Photo: Dhiraj Singh/Getty Images).

INDIA’S largest software exporter Tata Consultancy Services (TCS) said Friday (17) that its quarterly net profits rose just 0.2 per cent, missing estimates despite robust demand from European clients.

The Mumbai-based firm said its consolidated net profit rose to Rs 81.18 billion or £877.94 million for the quarter ending December 31, marginally higher than the Rs 81.05bn reported a year earlier.

A Bloomberg survey of analysts had projected the net profits to come in at Rs 81.89bn.

“In a seasonally weak quarter characterised by furloughs across multiple industry verticals, we focused on execution, while continuing to invest for future growth,” COO N Ganapathy Subramaniam said, pointing to the hiring of 30,000 trainees from April to September last year.

Quarterly revenues increased by six per cent, while demand from European clients grew 15.9 per cent year on year, he added.

The December-ended quarter is generally considered a weak period for India’s $150bn IT sector one of the country’s flagship industries due to annual holidays in Western markets.

TCS had postponed its earnings announcement originally scheduled in early January due to a high-profile legal battle over corporate governance issues at its sprawling parent company, the Tata Group.

Analysts said the software firm’s profit margins, although weak, had enjoyed a boost due to the Indian rupee’s falling value. TCS earns more than 80 per cent of its revenues from Western markets, including Britain, the US and Europe.

India’s second-most valuable company, TCS was at the forefront of an IT boom that saw the country become a back office to the world as firms largely in developed nations subcontracted work, taking advantage of a skilled English-speaking workforce.

TCS rival Infosys last week reported a 23.5 per cent jump in its quarterly profits as its international clients increased their spending and after an internal probe found no evidence of misconduct by its top executives.

Shares of TCS closed down almost one percent on Friday, before the company’s earnings report was released.