January 10, 2019

TCS's double digit growth further accelerates in Q3

  • Rupee revenue grows +20.8 percent YoY1; constant currency: +1.8 percent QoQ and +12.1 percent YoY
  • Stellar growth in UK and Europe: +25.1 percent and +17.6 percent YoY
  • Industry-leading digital growth: +52.7 percent YoY
  • Net profit up 24.1 percent YoY

Mumbai: Tata Consultancy Services (BSE: 532540, NSE: TCS), the leading IT services, consulting and business solutions firm reported its consolidated financial results according to Ind AS and IFRS for the period ending  December 31, 2018.

Financial highlights for quarter ended December 31, 2018

  • Revenue at Rs37,338 crore, +20.8  percent YoY.
  • Constant currency revenue growth: +1.8 percent QoQ and +12.1 percent YoY.
  • Net income at Rs8,105 crore, +24.1 percent YoY.
  • Operating margin at 25.6 percent, an expansion of 0.4 percent YoY.
  • Earnings per share at Rs21.60, +26.6 percent YoY.
  • Net cash from operations at Rs8,682 crore, ie, 107 percent of net income.
  • Dividend per share of Rs4.00.
  • Record date 18/01/19; payment date 24/01/19.

Business highlights for quarter ended December 31, 2018

  • BFSI growth continues to accelerate: +8.6 percent YoY (+6.1 percent YoY in Q2).
  • Digital revenue: 30.1 percent of total, +52.7 percent YoY.
  • UK and Europe lead growth: +25.1 percent YoY and +17.6 percent YoY respectively.
  • Continued investment in organic talent development: 292K+ employees trained in digital technologies; 318K+ employees in Agile methods.
  • Industry-leading talent retention: IT services attrition rate at 11.2 percent LTM.

Commenting on the Q3 performance, Rajesh Gopinathan, chief executive officer and managing director, said: “We are wrapping up 2018 with a strong revenue growth of 12.1 percent in the December quarter, which is the highest in 14 quarters, with continued growth acceleration in key verticals and across all geographies. The strong client metrics, industry-leading growth in digital services, a very strong order book and deal pipeline are all validations that customers recognise our differentiated capabilities and are picking us for their growth and transformation programmes.”

He added: “On a secular basis, as large segments of the economy go through churn driven by digital disruption, enterprises are responding with technology-powered strategies — as in algorithmic retailing or connected cars — creating a huge opportunity for services providers like us. Our investments in research and innovation, our deep domain and contextual knowledge, intellectual property and our collaborative approach to co-innovation have been key to our participation in this opportunity. This quarter, we launched a new brand, TCS Pace™, embodying these capabilities and offering our customers a line of sight to success in a Business 4.0 world.”

N Ganapathy Subramaniam, chief operating officer and executive director, said: “This has been a very satisfactory quarter in terms of revenue growth as well as operating metrics. The investments that we have been making in building newer capabilities and frameworks are starting to bear fruit. Our location-independent Agile methodology and Machine First™ approach have been key in helping us advance CEO-level enterprise transformation agendas.”

V Ramakrishnan, chief financial officer, said: “Despite headwinds from the rupee volatility against various currencies, and the higher cost of doing business in some major markets, our operating margins have been resilient. We remain focused on driving rigour in our operations, generating strong cash flows and steering profitability back to our preferred range, while continuing to invest strongly for future growth.”

Q3 segment highlights

Industries: Revenue growth continued to accelerate in BFSI (+8.6 percent vs +6.1 percent in Q2).  Growth was led by energy utilities (+18.1 percent), life sciences and healthcare (+15.7 percent), communications and media (+10.8 percent), and retail and CPG (+10.5 percent).
 
Markets: Revenue growth accelerated in all the geographies compared to Q2. Growth was led by UK (+25.1 percent), Europe (+17.6 percent), and Asia Pacific (+12.6 percent). North America grew 8.2 percent, India grew 9.7 percent and Latin America grew 7.6 percent.

Services:  

  • Consulting and services integration: Experienced strong demand in areas like M&A, global shared services and enterprise agility. TCS’s location-independent Agile methodology is resulting in large Agile wins with marquee clients.
  • Digital transformation services: IoT, TCS Interactive and cyber security had an exceptionally strong quarter.
    • IoT saw strong growth and deal wins around our digital twin, fleet management and energy management solutions. TCS launched the Intelligent Power Plant solution this quarter.
    • TCS Interactive saw significant offtake for digital content, digital channels and digital commerce services, led by opportunities around simplification and automation of MarTech stacks, seamless integration across the marketing ecosystem and marketing analytics. Acquisition of W12 Studios and winning the Red Dot design award were the other key highlights.
    • Cyber security services saw strong growth around managed security services, identity and access management, and governance risk and compliance.
    • Cloud services grew well in Q3, benefiting from enterprise-scale cloud adoption and its linkages to innovation. TCS’s cloud migration factory and estate modernisation offerings saw significant traction. TCS Enterprise Cloud enhanced its global footprint by launching centres in Australia and Canada.
  • Cognitive business operations: Saw strong growth powered by MFDM™ and cognitive services. TCS saw strong demand across M&A, digital infrastructure, cognitive business command centre, enterprise business processes and intelligent process automation.

Key highlights

  • Chosen by a large German investment bank and financial services company to conceptualise and implement the digital transformation plan for ensuring service continuity and identifying new revenue channels in compliance with regulatory directives, leveraging cloud, micro-services, analytics and cyber security capabilities.
  • Engaged by a leading Malaysian oil and gas company as a consulting partner to design and deliver an enterprise visualisation platform that provides visibility and greater business insights across the entire value chain. TCS will also offer digital learning-as-a-service for managing organisational change and employee alignment to the transformation initiative.
  • Selected by a large Brazilian bank as the primary vendor for digital transformation and innovation leveraging TCS expertise in digital channels, user experience and design capabilities.
  • An Australian public electricity and gas company entered into a new 3-year contract with TCS to support its shift to a fully Agile model across operations, whilst delivering on a contemporary set of capabilities such as automation.
  • Awarded a multi-year, multi-million dollar contract by a global hospitality chain to be the IT transformation partner.
  • Chosen by a leading Canadian insurer for its platform consolidation and digital transformation for 500,000 policies of closed book business, delivering transformational value, powered by the TCS BaNCS™ platform ecosystem.
  • Selected by a global leader in pool equipment and solutions for creating IoT-enabled pool equipment services that will enhance customer satisfaction and enable new revenue streams.
  • Selected by a leading North American telecom services provider to expand the capabilities of their IoT platform with new state-of-the-art features for managing connectivity across IoT devices by implementing a ThingSpace Connectivity Management solution.
  • Selected by a travel commerce platform as a strategic partner to enable end customers to acquire and trade their travel assets such as hotel rooms and airline seats across multiple travel service providers through an inter-operable blockchain platform.
  • Engaged by a global multi-food products group to consolidate their disparate business processes and create a scalable solution for their business across geographies by leveraging the latest digital ERP and analytics technologies.
  • NMBS/SNCB (Belgian Rail) selected TCS as a long-term, strategic partner for its SPRITE (Strategic Partner for Rail IT Engagement) programme, a key rail transformation journey encompassing innovative digital technologies and state-of-the-art technological services to enhance customer experience.
  • Awarded a multi-year, multi-million dollar contract by a large German insurance major to be its IT transformation partner.
  • Thomson Reuters, a leading source of intelligent information for the world’s businesses and professionals has partnered with TCS in product engineering and sustenance services for a suite of commercial software products that serves decision makers in the legal, tax and accounting businesses.
  • Selected by a global aluminium manufacturing firm to optimise its procurement spend with an enterprise-wide spend analytics platform across its operations, and also drive a strong cloud enablement programme.
  • Engaged by a British retail and commercial bank to simplify and transform its services across retail and commercial banking process functions with enhanced experience leveraging automation and Agile practices.
  • Chosen by a leading North American insurance firm as a strategic partner to run the data office program and lead their business transformation initiative by empowering the core decision-making process with a data-driven approach leveraging strong contextual knowledge.
  • Selected by a North American healthcare major to implement ignio™ to drive a Machine First™ transformation to provide a seamless experience to business users and improve business metrics across the entire healthcare value chain.
  • Elisa, a market-leading Nordics-based telecommunications, ICT and digital services provider, extended its strategic partnership with TCS to transform and grow its services by going Agile in a Machine First digital world.
  • Chosen by an Australian broadband service provider as its partner in the areas of network planning, design and operations, and to drive a Machine First™ transformation.
  • Selected by an industry-leading American technology company as a strategic partner to improve the time-to-market across its products leveraging TCS Quality Engineering Transformation platforms.

Research and innovation

  • Won the IT innovation award for TCS’s Digital Twin Solution at the Express IT Awards.
  • TCS Optumera™ received the Best Machine Learning / Artificial Intelligence Implementation Award at Cypher 2018.
  • TCS Tool VeriAbs (verification by abstraction and test generation) emerged winner in the International Competition on Software Verification 2019 held at TACAS in Prague, Czech Republic. 
  • TCS’s R&I team won the 'Most Innovative Project of the Year' award along with the client at The European Software Testing Awards 2018.
  • TCS researchers won best paper awards at the 4th Joint International Conference on Serious Games at Darmstadt, Germany.

As on December 31, 2018, the company has applied for 4,354 patents including 169 applied during the quarter, and has been granted 855 patents.

Human resources

TCS continued to attract very diverse talent in its ranks. Net addition in Q3 was 6,827 employees, bringing the total employee strength at the end of Q3 to 417,929 on a consolidated basis. The percentage of women in the workforce rose further to 35.8 percent, while the total number of nationalities represented grew to 151.

The company continued to invest heavily in organic talent development. These initiatives resulted in employees logging a cumulative 14.2 million learning hours. Over 292K employees have now been trained in digital technologies, and over 318K employees in Agile methods, making this the world’s largest Agile-ready workforce. TCS continued to have the best retention rate in the industry, with IT Services attrition rate (LTM) at 11.2 percent.

“TCS has navigated technology change in the digital era by investing in equipping employees with skills on newer technologies while valuing them for their contextual knowledge. This along with our progressive policies and employee engagement programmes have resulted in a vibrant, nurturing workplace that draws talent and keeps individuals highly motivated,” said Ajoy Mukherjee, executive vice president and global head, human resources.

Awards and recognition

Business leadership:

  • Won the 2018 Canadian National HR Award for Best Recruitment Campaign, for the fourth straight year.
  • Won 11 Stevies®— 5 Gold Stevies, 2 Silver Stevies and 4 Bronze Stevies — at the 2018 Great Employers Awards for achievements in talent acquisition and development, leadership training, and creative use of technology.     
  • Awarded the 2018 BEST Award by the Association for Talent Development.
  • Ranked No1 in the Top Employer in Asia Pacific 2019 rankings, including No1 Top Employer in Australia, Hong Kong, India, Malaysia and Singapore, and a Top Employer in the Philippines and China.
  • Won the Best Patents Portfolio Award (2013-2018) in the large (engineering) industries category at the CII Industrial Intellectual Property (IP) Awards 2018.
  • Ranked No1 for Customer Satisfaction in the 2018 Swiss IT Outsourcing Study by Whitelane Research.
  • Ranked No1 in the DQ Top 20 2018.
  • Won the Businessworld HR Excellence Award for Excellence in Diversity and Inclusion.

Partner:

  • Named an Azure Expert Managed Service Provider by Microsoft.

Sustainability:

  • Won Company of the Year Award from the Canada-India Business Council for achievements in business growth and impressive corporate social responsibility initiatives.
  • Won the Hr NETWORK Scotland National Award 2018 for the IT Futures program in UK.
  • Won Gold in the EcoVadis CSR Assessment for the fifth year in a row.
  • Recognised among sustainability leaders in the Dow Jones Sustainability World Index.

1 YoY: Year on year; QoQ: Quarter on quarter. All segment growth rates are YoY, and in constant currency unless specified otherwise