TCS revenue growth flat in quarter 3, demand yet to pick up
BENGALURU: TCS’s revenue increased 4.5% year-on-year in constant currency (which discounts impact of currency fluctuations), revenue during the Dec quarter, while it remained flat sequentially. However, in dollar terms, its revenue rose 3.6% to $7.5 billion during the same period.
TCS’s underwhelming sequential performance was affected by seasonality and a softer discretionary and demand environment. Many verticals saw sequential negative growth, which dampened its scorecard.
The Dec quarter is typically weak for IT firms, marred by furloughs and fewer working days, even as clients held back on discretionary spending. Its key geographies, North America and Continental Europe, declined 2.3% and 1.5% respectively. Its mainstay BFSI sector remained flat with a meagre 0.9% growth compared to the year-ago period. Communications & media and life sciences businesses declined 10.6% and 4.6% year-on-year respectively.
“We had a negative sequential growth in all major geographies and to some extent that was due to seasonality. When we called out trends in Q3, we saw softness in discretionary demand. Both these factors contributed to the negative sequential growth in all major markets. However, the point we wanted to emphasise here is the total contract value (TCV) growing after two quarters and in North America, BFSI, and CPG, and this gives us confidence in the medium term. I mentioned BFSI and the consumer business, but we have observed early trends in a few other verticals as well. Overall, this is what gives us confidence,” TCS CEO K Krithivasan said.
“We have also seen an improvement in sentiments regarding discretionary spending. Once the new govt comes in the US, there will be more certainty. There will be more confidence in discretionary spending,” he added.
TCS’s order book stood at $10.2 billion in the Dec quarter, compared to $8.6 billion in the preceding one. The BSNL contract has reached its peak, according to Krithivasan, and he anticipates a gradual decline while expressing confidence in growth from other regions. A consortium led by TCS won a contract for over Rs 15,000 crore from BSNL for deploying 4G networks across India. It’s one of the biggest domestic IT services deals so far.
