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Tata Consultancy Services kicked off the earnings season on a high note, however the stock is down 7% today (October 11, 2021). This could mainly due the company’s performance slightly below market expectations and on the back of concerns over supply-side challenges. 

On that note, TCS posted its Q2 FY22 results and reported a 29% YoY rise in its net profit. The software giant reported a consolidated net profit of Rs 9,624 crore in this quarter over a net profit of Rs 7,475 crore in the year-ago period on the back of strong margins and increased demand. 

The revenue from operations also increased by 16.8% YoY to Rs 46,867 in Q2 FY22 from Rs 40,135 crores in Q2 FY21. The company also recorded a net employee base of 528,748 employees after the end of the quarter, as of 30th September 2021. 

Hits

  • TCS added 22 new clients over the September quarter.
  • The company’s EPS (Earnings Per Share) grew by 15.7% on a YoY basis from Rs 19.9 to Rs 26.02
  • The company announced a second interim dividend of Rs.7 per share in its quarterly results.

Misses

  • The company’s total current liabilities increased to Rs 35,065 crore from Rs 34,155 crore on March 31, 2021.

TCS quarterly results – Segment-wise growth

Many verticals of the company showed double-digit growth in the last quarter. Here is a glimpse:

  • Manufacturing – 21.7% YoY
  • Life Sciences & Healthcare – 19% YoY
  • Retail and CPG – 18.4% YoY
  • BFSI – 17% YoY
  • Communications and Media – 15.6% YoY
  • Technology & Services – 14.8%

TCS has expanded its business in the international markets too. Here are the key figures:

  • North America – 17.4% QoQ growth
  • United Kingdom – 15.6% QoQ growth
  • Continental Europe – 13.5% QoQ growth

TCS Management Report

The company’s management reiterated that the demand environment is very strong and is likely to continue to be strong going ahead, at least in the medium term. The pipeline continues to remain strong with a good mix of both low duration as well as large duration deals. 

TCS in news

Here are a few developments that put TCS in the news over the last quarter –

  • The CEO and MD of the company, Mr. Rajesh Gopinathan, has been reappointed for the next 5 years to act at the same position.
  • TCS will hire 78,000 freshers in H1 FY22 to add to its workforce.
  • The company added five new clients to its portfolio with orders of more than USD 100 million. In the 100 million categories, its total number of clients stands at 54
  • Moreover, the company also has clients with businesses in the USD 50 million band. It added 17 new clients in this band and increased the client base to 114.

Impact on investors

The IT sector is a budding sector for the Indian economy as new and improved digital processes are slowly gaining popularity. TCS, being the largest IT company in India, has good growth potential in years to come, considering the deals acquired so far. And its pipeline (deals and contracts) continue to be robust which should aid in future growth. However, the management had indicated that the margin in the next 2-3 quarters could be soft due to the ongoing supply-side challenges and overseas travel restrictions. Since the company is expected to increase its employee base, it should be able to handle the challenges. 

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