Indian IT giant and Tata group company Tata Consultancy Services (TCS) has announced its quarterly results for the first quarter of FY2022-23.?
TCS has said that its net profit rose to ?9,478 crore in the first quarter of this financial year, i.e. April-June 2022, and expanded by 5.2% v/s the previous year. But it has fallen short of analyst estimates as steep salary hikes and increased lateral hiring amid rising attrition weighed down operating margins for India's largest software exporter, as per an ET report.
The Mumbai-headquartered company reported revenue of ?52,758 crore, which is an increase of 16.2% from ?45,411 crore in the June 2021 quarter, beating the 15.8% growth estimated in an ET poll of analysts. TCS declared an interim dividend of ?8 per equity share. Pointing to steady demand in the short to medium term", Rajesh Gopinathan, managing director and CEO of TCS cautioned that "however, at senior level, there are increasing discussions about the (US) recession".
"But we don't see an immediate footprint of it on our demand side," TCS CEO Gopinathan told reporters at a post earnings conference, as per ET.
Top executives termed the first quarter of fiscal 2023 as "challenging" from the point of view of rising costs due, in large part, to rising attrition which touched 19.7% compared with 17.4% in the previous quarter. Sequentially, revenue for the April-June quarter rose 4.3% even as profit contracted 4.6%.
Last week, a?US court passed an order confirming the $140-million punitive damages slapped on TCS?in 2014's Epic Systems case.
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The report stated that TCS said seasonality factors such as junior employees leaving for higher studies contributed to the spike, requiring the company to increase lateral hiring, thereby adding to costs.
Operating margin stood at 23.1%, dipping 240 basis points over 25.5% reported a year ago and down 190 basis points over the 25% reported last quarter. Margins were impacted by annual increments to the tune of 150 bps and 30 bps impact was from travel costs.
The company's order book stood at $8.2 billion in the just ended three-month period compared with the blockbuster $11.3 billion reported in the previous quarter. This includes a few deals in the $400 million-plus range.
During the April-June quarter, TCS reported major deals from clients like Payments Canada, Financial Ombudsman Service UK, Kansas Department of Labour and Stellantis Group.
Among major markets, North America led with 19.1% growth while Continental Europe clocked 12.1% and UK with 12.6% growth respectively. However, on a sequential basis, the UK decreased by 3.3%.
In emerging markets, India grew 20.8%, Asia Pacific grew 6.2%, Latin America grew 21.6% while the Middle East & Africa grew 3.2%.
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