Tata Consultancy Services results: 3 key takeaways

Tata Consultancy Services or TCS (NSE:TCS) is the largest technology company in India by market cap. It provides information technology solutions and operates through various business segments that include Banking, Financial Services & Insurance (or BFSI), Manufacturing, Retail & Consumer Business (or CPG), Communications, Media & Tech.

Last week, TCS reported its results for the fourth quarter of the 2021 Indian financial year. Let’s take a look at some of the tech giant’s key metrics

A rise in revenue and profit margins

In the March quarter, TCS reported sales of $5.98 billion, an increase of 10% year over year. After accounting for foreign exchange fluctuations, its sales were up 6% year over year. Its operating margin stood at 26.8% while net margin was 21.2% in Q4 of fiscal 2021.

Comparatively, the company’s operating margin and net margin stood at 25.1% and 20.2% respectively in the prior-year period. This shows us the operating profit for Tata Consultancy Services rose from $1.36 billion in Q4 of fiscal 2020 to $1.6 billion in Q4 of fiscal 2021. Further, its net income rose from $1.09 billion to $1.26 billion in the same period.

Revenue growth was up on a sequential basis across segments

TCS experienced strong sequential growth in Q4 across business segments. Its BFSI business sales were up 7% compared to Q3 driven by large deals as well as the company’s investments that enhanced customer engagement and expansion into newer verticals. Its year over year growth in BFSI was 13%.

Tata Consultancy’s Retail business that includes CPG and Travel, Transportation and Hospitality saw top-line soar by 4% sequentially despite weakness in a few sub-sectors. The Retail business saw its revenue decline on a year over year basis due to pandemic-related weaknesses.

The Life Sciences and Healthcare segment performed well in Q4 and was up 3.8% on a sequential basis. In the last decade, this segment has been a key revenue driver accounting for almost 10% of total sales in fiscal 2021, up from just 4.5% in fiscal 2011. In the last 10 years, the Life Sciences and Healthcare vertical has grown sales at an annual rate of 19.5%.

Robust growth in TCV

In the last year, COVID-19 has acted as a tailwind for technology companies as enterprises are now focusing on digital transformation solutions in order to create a lean operational structure. TCS continues to see many wins across core transformation solutions including cloud migration, application modernization as well as data modernization.

These trends are driving strong demand for the company’s services and TCS closed the year with the highest TCV (total contract value) in signed deals in Q4. The overall order booked signed in the March quarter was $9.2 billion. In fiscal 2021, its total order book grew 17.1% year over year to $31.6 billion.

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