India’s COVID-19 wave hits TCS profits
The coronavirus wave that hit India this year badly ate into the earnings of the country’s biggest software exporter Tata Consultancy Services, the company said.
According to AFP, the IT giant reported net profit of 90.08 billion rupees ($1.20 billion) in the quarter ended June 30, an increase of 28 percent on the same quarter last year when figures were also cut by the pandemic.
On a quarterly basis, however, the profit of India’s second most valuable company by market capitalization declined by 2.6 percent, despite a strong performance in North America and Europe.
“It’s a story of two markets,” said CEO Rajesh Gopinathan.
“We have the core markets, which are growing very strongly and we have primarily the Indian market that has been significantly impacted, de-growing at minus 14 percent.”
India suffered a devastating COVID-19 wave in April and May that inflicted tens of thousands of deaths and closed many businesses.
Wage hikes also affected what is usually a strong quarter for India’s IT sector, resulting in TCS’s operating margins shrinking by 1.3 percent quarter on quarter, to 25.5 percent.
Revenues jumped 18.5 percent year on year, to 48.85 billion rupees, but against the previous quarter rose only 2.4 percent.
Growth was led by North America, Europe and Latin America, where revenues grew between 16 and 20 percent, year on year.
Big-ticket deals and contract renewals in the quarter maintained TCS’s order book at $8.1 billion, following record order wins of $9.2 billion in the previous quarter.
Chief operating officer N. Ganapathy Subramaniam called it another “superior quarter” for orders.
The company added 20,409 employees in the quarter, its highest net addition ever.
TCS was at the forefront of an IT boom that saw India become a back office to the world as firms in North America and Europe subcontracted work, taking advantage of a skilled English-speaking workforce. The company earns more than 80 percent of its revenues from Western markets.
Shares of TCS closed 0.67 percent lower in Mumbai ahead of the results being released.