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TCS Disappoints for 6th Quarter, Results Weighed Down by Chennai Floods

Tata Consultancy Services missed dollar revenue growth estimate for sixth straight quarter, disappointing investors. India's biggest outsourcer posted revenues of $4,145 million in the December quarter, which was lower than $4,156 million the company generated in the previous quarter.
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TCS Disappoints for 6th Quarter, Results Weighed Down by Chennai Floods
Tata Consultancy Services missed dollar revenue growth estimate for sixth straight quarter, disappointing investors. India's biggest outsourcer posted revenues of $4,145 million in the December quarter, which was lower than $4,156 million the company generated in the previous quarter.

In constant currency revenue, TCS managed to post a sequential growth of just 0.5 per cent in the December quarter, signaling a sharp deceleration. TCS had posted 3.9 per cent sequential dollar revenue growth in July-September quarter.

TCS chief executive N Chandrasekaran said on Tuesday that the company's international business registered a growth of 1.1 per cent in constant currency, but 0.6 per cent contraction in domestic business impacted overall growth.

"All our industry segments have exhibited growth in a traditionally weak quarter additionally accentuated by the impact of the Chennai floods," said Mr Chandrasekaran.

Analysts had factored in muted performance by TCS because of Chennai floods, which disrupted normal business functioning at the company's delivery centre in the city for five days last month. Besides, the December quarter is considered soft because of Christmas and New Year holidays and furloughs in the key markets of US and Europe.

Traders say Tuesday's numbers are likely to weigh on TCS shares, which have underperformed the broader markets as well as other frontline IT stocks over the last three months. TCS shares closed 1.5 per cent lower at Rs 2,327 after hitting a 52-week low.

In Indian currency, TCS reported a net profit of Rs 6,110 crore on sales of Rs 27,364 crore, beating expectations. However, operating margins came down to 26.6 per cent as compared to 27.1 per cent in the previous quarter.

The company won nine big deals and the number of clients in the $100-million-plus revenue category rose by one to 34.

TCS' digital business grew 4 per cent in constant currency and now accounts for nearly 14 per cent of overall revenue. The digital business has high margin and is the fastest-growing segment in the IT space.

TCS said attrition levels have come down by 30 basis points sequentially to 15.9 per cent; the company had 3.45 lakh employees on its payroll as on December 31, 2015.

The company also announced a dividend of Rs 5.50 per share.

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