TCS NUMBERS HIT THE SPOT!

Obviously, the newsmaker today, hitting all business headlines is the Q2FY21 performance of TCS and more significantly, its buyback.

Late in the evening yesterday, TCS announced earnings which beat street expectations, led by all-round growth across main verticals and geographies.

A quick look at the numbers: (QoQ)

• Consolidated revenue – up 5% at Rs.40,135 crore
• Net profit - Rs.7475 crore, up 7%
• Bottomline would have been much higher but for the provision of Rs.1218 crore in EPIC legal case
• EBIT – up 16% at Rs.10,689 crore
• EBIT Margin – 26.2% v/s 23.6% - remains one of the best in the industry
• Net cash from operations – Rs.10,618 crore
• Second Interim dividend of Rs.12/share
• Salary hikes for all employees – effective 1^st Oct
• Order pipeline - $8.6 billion v/s $6.9 billion

Growth in verticals: (QoQ)

• BFSI – up 6%
• Retail – up 9%
• Life Sciences & healthcare – up 7%
• Tech & services – up 3%
• Manufacturing – up 1%
• Communications & Media – down 2.4%

Growth across geographies: (QoQ)

• North America – up 4%
• UK – up 4%
• Europe – up 6%
• India – up 20%
• Middle East & Asia (MEA) – up 8%
• Latin America – up 5.5%
• Asia Pacific – up 3%

The company does not give revenue guideline but the commentary of the CEO, Rajesh Gopinathan is very optimistic. He said, “We are in the midst of a demand recovery when we look at our deal pipeline and our conversations with customers. This demand recovery has strong legs. This is not catch-up demand but rather sustained demand momentum.”

The focus of the market – the Rs.16,000 crore buyback. It will buyback 5.33 crore shares, or 1.42% of the total paid-up equity, at Rs 3,000 v/s yesterday’s close of Rs.2737.40.

This is obviously a precursor for others in the sector to follow suit. And that has already happened – Wipro yesterday evening announced its plans for a buyback and the Board will meet on 13^th Oct to decide on the contours. A day before that, on 12^th Oct, the company will declare its earnings. Infosys is scheduled for 14^th Oct though we are yet to hear of a buyback plan. With IT companies sitting on large cash surplus, this is a prudent move.

Obviously, for the market, this growth recovery and the buyback are big bang news – with the market desperate for some news, this hits the spot just right.