MUMBAI – India’s largest software exporter Tata Consultancy Services reported on Monday that its December quarter revenue rose but fell short of expectations and warned of a “cautious” business environment in the new year.
TCS is India’s second most valuable company by market capitalization, earning over 80% of its revenue from the western markets.
Being at the forefront of the IT boom, India has become the world’s back office as North American and European companies subcontract with a skilled English-speaking workforce.
More recently, technology companies have benefited from the increased demand for digital services since the pandemic.
But fears of an impending recession in key Western markets have taken a toll on business sentiment as software customers have grown cautious in recent months, the company said.
“Europe is a market where clients’ decision-making is affected by ongoing geopolitical challenges and should be monitored closely,” Chief Executive Officer Rajesh Gopinathan said at a press conference.
Gopinathan added that North America, which accounts for half of its business, remains “vibrant” despite customers expected to remain “cautious” and wary of inflation at the start of the year.
The IT giant’s net profit reached 108.46 billion rupees ($1.3 billion) for the three months to 31 December, an increase of 11% over the same period last year.
Operating income increased 19% year-on-year to Rs 582.29 billion, surpassing $7 billion for the first time in any quarter, driven by sustained demand across the business segments.
Earnings exceeded expectations, but profits were slightly below expectations, media reports said.
The Mumbai-based company said orders fell to $7.8 billion at the end of December, compared with $8.1 billion at the end of September, although within its guidance range of $7 billion to $9 billion.
The company, one of India’s largest private employers, saw a decline in its headcount in the fourth quarter as hiring continued to slow.
Employee turnover, a key industry metric, fell to 21.3% from 21.5% last quarter.
Operating margin increased 0.5 percentage points from the September quarter to 24.5%, but contracted 0.5 percentage points year-on-year.
The Board of Directors of the Company has approved an interim dividend of Rs.8 per share and a special dividend of Rs.67 per share.
The company’s shares closed 3.35% higher in Mumbai ahead of the results announcement.
ng/slb/dhc
