TCS Q2 Results Review - Tough Phase, Balancing Growth, Margins: PL Capital

PL Capital Report

Tata Consultancy Services Ltd. reported revenue of $7.7 billion, up ~1.1% QoQ constant currency below our and consensus estimate of 1.5% and 1.3% QoQ CC growth respectively while in dollar terms the revenue grew by 2.2% QoQ (our estimate: 2.3% & consensus estimate of 1.9% QoQ growth).

The growth during the quarter was largely driven by Regional market, predominantly the BSNL deal that is at its peak (~150 bps contribution in Q2 per our estimates).

Green shoots continued in BFSI, while growth within certain pockets remained volatile, partly attributed to work re-scoping and weak spending sentiment.

Ebit margin declined by 60 bps QoQ to 24.1%, on account of higher third-party expenses and inching-up subcon cost, which partly offset by currency tailwinds and missing Q1 wage hike impact. Total contract value grew by 3.6% QoQ to $8.6 billion and BTB remained stable at 1.1 times.

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