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TCS posts sluggish growth as slowdown grips big banks in Europe, NA

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Rajesh Gopinathan, CEO & MD, TCS

Global IT giant Tata Consultancy Services (TCS) witnessed a muted growth in its revenues coming from the BFSI (banking, financial services, and insurance) segment in the quarter ending September 30, 2019, due to a weak IT spending among a few European banks.

The Indian IT major, whose major bulk of revenues comes from the BFSI segment, posted a marginal growth in its overall income at $5.6 billion during the second quarter of fiscal (March to April) 2020  as against $5.2 billion. Revenue in rupee terms grew by 2.1 percent quarter-on-quarter at $5.4 billion in Q2FY20, the IT company said and forecast double-digit growth in the next two quarters.

Revenues from the BFSI industry stood at $2.1 billion during the quarter as compared to $2.05 billion in the year-ago period.

The net profit for the July-September quarter remained flat at $1.12 billion as against $1.11 billion. The margins were impacted because of a continued slowdown in the BFSI and retail segment for the last few quarters.

Rajesh Gopinathan, the CEO and managing director, TCS, said at a press conference in Mumbai that, “We ended the quarter with steady growth despite increased volatility in the financial services and retail verticals. We remain confident as the medium-and-longer term demand for our services continues to be very strong, as evidenced by Q2 order book at $6.4 billion, the highest in the last six quarters.”

“…We are seeing softness in larger banks in North America & UK and capital markets. The retail recovery has been pushed back. So, we don’t have clear viability on when Retail and BFSI will see a recovery,” Gopinath said.

Gopinath further added that even as the overall BFSI wasn’t growing as expected, the insurance business continued to post strong results. Besides, the regional banks in Europe and small banks in the US were doing well while the bigger banks continued to be under pressure. TCS earns the majority of its revenues from markets like North Americas, the UK, and Europe. The UK market grew at 13 percent despite growing concerns over the Brexit issue.

“There are times of economic stress. Our ability to stay agile during such times has become an opportunity for us,” Gopinath said referring to the Brexit.

The Mumbai-headquartered company is also betting big on its digital services segment. The vertical, whose contribution to the overall revenue grew to 33.2% during the quarter, witnessed the highest number of deals during the quarter in this year so far. However, the revenue growth of the segment, which focuses on providing futuristic technology solutions such as AI, data analytics, IoT, Cloud, and blockchain,  dropped to 28 percent in Q2, from 40 percent in the previous quarter.

The company declared a total dividend of Rs 45 per share for the quarter, including a special dividend of Rs 40 for the first time since 2014.

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