TCS has announced Q2 FY21 results, for the period ending September 30, 2020:
- Revenues were $5,424m, down 1.7% y/y, down 3.2% in CC
- Operating income (EBIT) was $1,422m, a margin of 26.2%, up 2.2 pts y/y.
Q2 FY21 revenue mix by geography (with NelsonHall estimates of revenue) and CC y/y growth was:
- North America 49.9% ($2,707m) -3.0%
- Latin America 1.7% ($92m), -2.7%
- U.K. 15.5% ($841m) -8.1%
- Continental Europe 16.3% ($884m) +3.7%
- India 5.0% ($271m) -10.7%
- APAC 9.7% ($526m) -1.8%
- Middle East/Africa 1.9% ($103m) -5.4%.
Q2 FY21 revenue mix by vertical (with NelsonHall estimates of revenue in US$) and CC y/y growth was:
- BFSI 31.9% ($1,730m) -1.1%
- Retail & CPG 14.6% ($792m) -5.7%
- Communication & Media 6.5% ($353m) -10.1%
- Manufacturing 9.4% ($510m) -7.3%
- Life Sciences & Healthcare 9.8% ($532m) +17.2%
- Technology & Services 8.9% ($483m) -1.5%
- Regional Markets & Others 18.9% ($1,025m) -9.2%.
The number of clients generating annual revenue of (and at end Q2 FY20) was:
- $10m+, 386 (398)
- $20m+, 228 (225)
- $50m+, 97 (101)
- $100m+ 49 (47).
Headcount at end September 2020 was 453,540, a net increase during the quarter of 9,864.
Annualized attrition in Q2 FY21, excluding BPO, was 8.9%.
| Vendor | Tata Consultancy Services |
| Initial currency type (specify local currency used) | US$ |
| Period Ending | 2019-09-30 |
| Growth | -1.7 |
| Revenues ((m) in local currency | 5424 |
| Revenues (in $m at that date) | 5424 |
Analyst comments:
In the quarter when the impact of COVID-19 was, hopefully, most pronounced, TCS is showing both its resilience and also its increased relevance to large clients.
Revenue degrowth improved substantially from the 6.2% negative CC growth TCS reported for the April-June quarter, helped by a better expected recovery in BFSI (31.5% of total revenues) and Retail/CPG (14.6% of total revenues). Life Sciences and Healthcare, which continues to enjoy very strong growth, now accounts for nearly 10% of total revenues and is thus becoming a growth engine. In terms of markets, the rate of degrowth in North America has improved substantially from the 6.1% experienced in Q1.
TCS is benefiting from improving demand in areas including cloud and security, customer & employee experience, supply chain, automation and security.
The CC y/y revenue degrowth of just 3.2% is perhaps the best we will see from major IT services providers for the quarter, while the 26.2% EBIT margin indicates the company's ability to apply margin levers very quickly. Looking ahead, while management was, by TCS' usual standards, cautious, bookings during the quarter were very strong at $8.6bn.
We have seen TCS benefit in some instances of vendor consolidation: scale as well as capabilities have helped.