Strong Digital Demand, Great Execution Mark Robust Q3

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Mumbai, India

 

  • Net profit at Rs 6,778 Cr; up 2.9% Q-o-Q & 10.9% Y-o-Y in Q3
  • Revenue at Rs 29,735Cr; up 8.7% Y-o-Y; 1.5% Q-o-Q
  • Constant currency revenue growth of 2.0%, Volume growth of 1.0% QoQ
  • Digital revenues at 16.8%; up 30.2% Y-o-Y

 

 

 

 

 

Tata Consultancy Services (BSE: 532540, NSE: TCS), the leading IT services, consulting and business solutions firm reported its consolidated financial results according to IFRS and Ind AS as on December 31, 2016.

 

Financial Highlights for Quarter Ended December 31, 2016

  • Operating Margins stable at 26.0%
  • Operating Income at Rs 7,733 crore; Growth of 6.3% Y-o-Y and 1.5% Q-o-Q
  • Strong Free Cash Flows at 111% of Net Profit
  • Total Dividend per share of  Rs 6.50; Earnings Per Share at Rs 34.40

 

 

 

 

  • Proposed record date 24/01/17; Payment date 01/02/17

 

 

Business Highlights for Quarter Ended December 31, 2016

  • Total employees: 378,497; Gross addition: 18,362 employees
  • Attrition down further Q-o-Q to 11.3% (LTM) in IT Services
  • Clients in $50M+ revenue band increased by 2 and in $10M+ revenue band by 5

 

 

 

 

Commenting on the Q3 performance, CEO and MD, N Chandrasekaran said “The resilience of our business model and strength of our operating strategy has been brought to the fore by our performance in Q3, traditionally a quarter of weak demand. Our strengths in Digital, Platforms and Cloud as well as our deep knowledge of the customers’domain are driving our ability to play a strategic roleand make a holistic impact on the business.”

 

Mr Chandrasekaran added “To support and sustain our Digital business that is growing at 30% on an annual basis, we continue to build new capabilities in Digital technologies, empower employees to enhance agility in the workplace and invest moreto developIP-based platforms and products. Some of these products and platforms are maturing with greater customer adoption while others continue to be incubated in our Innovation labs. As digital adoption increases in 2017, we are well prepared to lead this change.”

 

Rajesh Gopinathan, Chief Financial Officer, said “We have shown great discipline and control at all levels to deliver another credible quarter. Alongside a good growth performance, we have been able to keep profitability stable in our desired range anddeliver over $1 billion in free cash flowduring the quarter.”

During Q3, growth was led by Energy & Utilities (up 5.8% sequentially), Hi-Tech (up 2.6% sequentially), BFSI (up 2.1% sequentially), Manufacturing (up 2.1% sequentially) and Retail (up 1.9% sequentially) in constant currency.

 

From a geography perspective, emerging markets like Latin America and India clocked double digit growth of 12.5% and 10.3% sequentially respectively while North America grew 2.2% sequentially and UK grew 1.7% sequentially.

 

From a services perspective, strength in growing segments like Platforms, Cloud and Internet of Things is evident from the growth in Asset Leveraged Solutions (up 21% sequentially), Infrastructure services (up 9.5% sequentially) and Engineering and Industrial Services  (up 3.1% sequentially).

 

Select Digital Wins

  • Engaged by a North America based investment services firm for a consulting engagement to define an end-to-end strategy for predicting commercial loan performance using machine learning
  • Selected by a European multinational pharmaceutical company to empower employees digitally as a part of initiative to reimagine the workplace
  • Selected by a leading North American auto insurance company to reimagine the driver’s connected cars experience
  • Chosen by a leading North American insurance firm to transform their legacy claims program by using TCS proprietary Big Data product  TCS Active Archive™
  • Selected by an American multinational financial services corporation to deliver advanced analytics using a comprehensive data management framework developed using TCS Big Data methodology
  • Chosen by a North American federal bank for an architecture and strategy consulting engagement to define their enterprise data strategy, operating model and execution roadmap
  • Chosen by a leading North American Bank to implement an end-to-end data transformation program using big data technologies
  • Selected by a leading North American Utilities company to transform their customer experience through a state-of-the-art digital customer engagement platform across all channels

 

Select Wins in Q3

  • Selected by a large European Bank as global strategic partner for IT transformation programs
  • Chosen as a Strategic Partner by a Global Financial Services major in North America to deliver Enterprise Infrastructure and Production Services leveraging IgnioTM, TCS’ cognitive automation product.
  • Selected by a leading energy company in United Kingdom for next-generation initiatives to enable faster adoption of cloud-based infrastructure and applications
  • Selected by a large Global Bank for a multi-year transformation project to optimise IT operations.
  • Selected by a North American Tier-1 Manufacturer as a strategic global transformation partner to drive in business agility, operational efficiency and IT model refinements.
  • Chosen by a large Europe retailer for establishing a Global Enterprise cloud across ANZ, US and Europe.
  • Engaged by India government for the transformation of digital services in areas of customs, central excise and service tax to enable GST implementation and the ease of doing business.
  • Selected by a large equipment rentals company in Japan to transform and replace its core systems
  • Selected by a leading European supplier of logistics & communication solutions to households and businesses to manage and digitally transform their core operational systems

 

Innovation and Intellectual Property

As of December 31, 2016, the company has applied for 3161 patents, including 80 applied during the quarter. Till date the company has been granted 440 patents

 

Human Resources

The total employee strength at the end of Q3 was 378,497 on a consolidated basis with gross addition of 18,362 (net addition: 6,978) employees. The total attrition rate (LTM) further fell to 11.3% in IT services and was at 12.2% including BPS. The percentage of women in TCS rose to an all-time high of 34.6%.

 

“Our efforts and investments to build professionals with the right digital skills continue and now more than 190,000 TCSers are equipped with new capabilities to help our customers with their transformations. We are also happy that our retention rates continue to rise as we remainengaged with our employees to help them succeed in a digital world,” said Ajoy Mukherjee, Executive vice president and Global Head, Human Resources.

 

Awards and Recognition

Business Leadership:

  • Gold award for TCS New York City Marathon App at Best in Biz Awards 2016
  • ‘BEST Award’ 2016 from the Association for Talent Development
  • Named the “Top Employer Asia Pacific 2017” by the Top Employers Institute:

 

 

 

 

o  First Time Top Employer Certifications in Philippines and China and Multi-year Certifications in Australia, India and Singapore

  • Named ‘Top 100 Excellence Employer of China’ and award for ‘Excellence in HR Management Team’ in China
  • Selected as a member of the Intellectual Property (IP) Asia Elite 2016

 

 

 

Partner:

  • Won ‘Supplier of the Year 2016’ Award from Cisco Systems Inc.
  • Awarded the Transformation Solution Partner 2016 for Americas by Hitachi Data systems
  • Won The Pega Japan Best Partner Award 2016
  • Awarded at Expericon 2016

 

 

o   Most Active Partner

o   Most Innovative Mobile Device Lab deployment for a leading Europe-based telecom provider

o   ‘2016 Digital Innovator of the Year’

 

Sustainability:

         Won ‘Project of the Year – Contribution to Community’ at PMI India Awards 2016

  • Received award for Social Inclusion and Diversity in Ecuador
  • Won the International Green Apple Environment Award for Carbon Reduction in UK & Ireland.
  • Award for contribution towards community service in South Africa

 

 

 

 

About Tata Consultancy Services Ltd (TCS)

Tata Consultancy Services is an IT servicesconsulting and business solutions organization that delivers real results to global business, ensuring a level of certainty no other firm can match. TCS offers a consulting-led, integrated portfolio of ITBPSinfrastructureengineering and assurance services. This is delivered through its unique Global Network Delivery Model™, recognized as the benchmark of excellence in software development. A part of the Tata group, India’s largest industrial conglomerate, TCS has over 378,000 of the world’s best-trained consultants in 45 countries. The company generated consolidated revenues of US $16.5 billion for year ended March 31, 2016 and is listed on the BSE (formerly Bombay Stock Exchange) and the NSE (National Stock Exchange) in India.

 

For more information, please visit us at www.tcs.com | @TCS

 

IFRS Financial Statements

 

Unaudited Condensed Consolidated Statements of Comprehensive Income

For the three-month periods ended December 31, 2015, September 30, 2016 and December 31, 2016

(In millions of Rs, except per share data)

 

 

Three-month period ended

December 31, 2015

Three-month period ended

September 30, 2016

Three-month period ended

December 31, 2016

 Revenue

273,640

292,840

297,350

 Cost of revenue

152,194

165,340

168,780

 Gross margin

121,446

127,500

128,570

 SG & A expenses

48,684

51,330

51,240

 Operating income

72,762

76,170

77,330

 Other income (expense), net

6,991

10,520

11,850

 Income before income taxes

79,753

86,690

89,180

 Income taxes

18,501

20,660

21,040

 Income after income taxes

61,252

66,030

68,140

 Minority interest

157

170

360

 Net income

61,095

65,860

67,780

 Earnings per share in`

31.01

33.43

34.40

 

Unaudited Condensed Consolidated Statements of Financial Position

As of March 31, 2016 and December 31, 2016

(In millions of Rs)

 

 

As of March 31, 2016

As of December  31, 2016

Assets
 Property and equipment

117,900

116,970

 Intangible assets and Goodwill

39,460

38,280

 Accounts Receivable

240,730

242,120

 Unbilled Revenues

39,920

45,370

 Investments

228,220

349,210

 Cash and Cash equivalents

62,950

37,460

 Other current assets

63,740

87,230

 Other non-current assets

119,200

89,350

Total Assets

912,120

1,005,990

Liabilities and Shareholders’ Equity
 Shareholders’ Funds

731,890

838,470

 Long term borrowings

830

590

 Short term borrowings

1,620

1,960

 Other current liabilities

154,070

140,640

 Other non-current liabilities

20,170

20,800

 Minority Interest

3,540

3,530

 Total Liabilities

912,120

1,005,990

 

Ind AS Financial Statements

Consolidated Statement of Profit and Loss

For the Quarter ended December 31, 2015, September 30, 2016 and December 31, 2016

(In crores of Rs, except per share data)

 

Quarter ended   December 31, 2015

Quarter ended September  30, 2016

Quarter ended   December 31, 2016

INCOME

27,364

29,284

29,735

EXPENDITURE

 a) Employee costs

14,011

15,280

15,275

 b) Other operating expenses

5,606

5,891

6,231

 c) Depreciation

471

496

496

Total Expenditure

20,088

21,667

22,002

Profit Before Taxes & Other Income

7,276

7,617

7,733

Other income (expense), net

699

1,052

1,185

Profit Before Taxes

7,975

8,669

8,918

Provision For Taxes

1,850

2,066

2,104

Profit After Taxes & Before Minority Interest

6,125

6,603

6,814

Minority Interest

15

17

36

Net Profit

6,110

6,586

6,778

Earnings per share in `

31.01

33.43

34.40

Consolidated Balance Sheet

As at March 31, 2016and December 31, 2016

(In crores of Rs)

 

As at March 31, 2016

As at December 31, 2016

ASSETS
Property, plant and equipment

11,775

11,612

Investments

22,822

34,921

Deferred Tax Assets (net)

2,908

2,674

Goodwill (on consolidation)

1,669

1,633

Cash and Bank Balance

6,788

4,298

Current Assets, Loans and Advances

33,946

36,920

Non-current Assets, Loans and Advances

9,188

6,437

Total Assets

89,096

98,495

Liabilities and Shareholders’ Equity
Shareholders’ Funds

71,072

81,742

Minority Interest

355

354

Short term and long term borrowings

196

225

Deferred Tax Liabilities (net)

805

916

Current liabilities and provisions

15,456

14,094

Non-current liabilities and provisions

1,212

1,164

Total Liabilities

89,096

98,495