- 13 Jan 2022
- ICICIdirect Research
TCS margins disappoint; announces buyback of Rs.18,000 croreTCS - 3290 Change: -26.70 (-0.81 %)
News: Tata Consultancy Services' (TCS) results were above our estimates on revenue front but below on the margin front. Revenue grew 3% QoQ to US$6,524 mn (vs. 2% QoQ growth expectations) . In terms of revenue by geographies (in CC terms), North America , UK and Continental Europe reported healthy growth. In vertical wise, BFSI, retail & healthcare drive the growth. EBIT Margins came in at 25% ( vs expectations of 25.8%) were impacted by (-70 bps) due to wage hike , (-60 bps) higher SG&A while It was mitigated by pyramid optimisation (+60 bps), currency tailwind of (+10 bps), resulting into 60 bps QoQ contraction.
Views: Net adds for the quarter were highest ever as some of the hiring meant for H2 were front loaded. The demand outlook continues to be strong as clients are accelerating their spending on cloud transformation and new technologies to remain ahead of the curve. However, rising attrition (LTM basis it was higher but on sequential basis it was lower QoQ) amid supply side challenges continue to put pressure on margins. The company has been in active discussion with clients for price increase amid cost pressures and there has been a positive feedback on the same.