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TCS announces ₹16,000 crore buyback — strong show in Q2 with 7% rise in profit, margins near two-year high

Oct 7, 2020, 20:26 IST
Business Insider India
Tata Consultancy Services (TCS) announces second quarter resultsIANS
  • Tata Consultancy Services (TCS) board of directors has approved the buyback of over 5 million equity shares worth ₹16,000 crore at the value of ₹3,000 each.
  • The company posted an adjusted profit of 20.3% in the second quarter with a jump of 4.8% in revenue (constant currency) sequentially.
  • TCS also announced a second interim dividend of ₹12 per ₹1 equity share.
  • Check out all the latest news and updates on Business Insider.
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Tata Consultancy Services (TCS) has delivered on all parameters. It put up a strong show in the second quarter, led by strong revenue growth and margin expansion.

Adjusted profit has risen 20% over last quarter, which excludes legal claim provisions amounting to around $165 million in TCS’ ongoing case against Epic Systems. The overall profit after tax stands at ₹7,475 crore, up 6.7% over the last three months.

India’s largest IT services company has also logged in revenue growth of 4.8% sequentially in constant currency. Consolidated revenues grew by 4.7% to ₹40,135 crore on a quarterly basis, while strong deal closures amounted to $8.6 billion.

“The $8.6 billion also includes $2.5 billion with Phoenix systems, which was announced a few quarters back, but the contract got executed this quarter. Excluding that, it’s still a very herding $6.1 billion,” said TCS CEO Rajesh Gopinathan.

Margins remain strong, expanding by 2.2% yearly to 26.2% this quarter.

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"What we are witnessing right now is the start of the first phase of a multi-year technology transformation cycle,” said TCS CEO Rajesh Gopinathan.

TCS’ attrition is also at an all-time low of 8.9% as it adds 9,964 employees to its roster and plans to start rolling out salary hikes from October 1.

Buyback, dividend and a change of guard
Aside from the financials, the company also announced a mega buyback. The board of directors has approved the buyback of 53 million equity shares worth ₹16,000 crore. It amounts to around 1.42% of the total paid-up equity capital at ₹3,000 per share.

The company will also be doling out ₹12 per ₹1 equity share as a second interim dividend for shareholders.

There’s also a change of guard afoot with TCS CFO V Ramakrishnan set to step down on April 30, 2021. The company has chosen Samir Seksaria, who is currently the vice-president of finance, as his successor. Seksaria has been with the company since 1991 and has held various positions within the organisation in business consulting and finance in that time.

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TCS continues its winning streak
Analysts expected a good quarter for the company after it wrapped up around ten new deals over the last three months. The numbers are also a big step up from the previous quarter when the company posted a dip of 6.3% in its revenue and profit took a hit of 13%.

TCS recently became the second Indian company to cross the ₹10 lakh crore barrier after Mukesh Ambani’s Reliance Industries that has been on an investment hot streak.

TCS new deal wins in the second quarter:
Client Sector
Forth portsTravel
TPT South AfricaTravel
TrygBFSI
Emirate NBDBFSI
VistaprintManufacturing
Valiant GroupManufacturing
Coop SwedenRetail
MorrisonsRetail
MauricesRetail

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