October 12, 2017 / 11:37 AM / 2 years ago

Tata Consultancy Services positive on retail business turnaround, cautious on financial services

MUMBAI/BENGALURU (Reuters) - India’s top IT services firm Tata Consultancy Services Ltd (TCS) said it expected an uptick in the retail business segment in the coming quarters but remained cautious about the banking and financial services segments that form the bulk of its revenues.

Logos of Tata Consultancy Services (TCS) are displayed at the venue of the annual general meeting of the software services provider in Mumbai, June 29, 2012. REUTERS/Vivek Prakash/Files

Mumbai-headquartered TCS on Thursday posted a 2 percent decline in second-quarter profit on Thursday, held back by sluggish growth in the banking and retail sector.

All segments of the business, except the banking, financial services and insurance (BFSI) and retail sectors, grew revenue above 9.5 percent. BFSI accounts for more than 30 percent of TCS’ revenues, while retail makes up about 13 percent.

“In retail we’re seeing a significant amount of traction... I think we should see a turnaround in retail in the next few quarters itself,” Chief Executive Rajesh Gopinathan told reporters in Mumbai.

“Directionally it [BFS] is positive but difficult to say when the turnaround in BFS is likely to happen.”

TCS posted a net profit of 64.46 billion rupees ($990 million) in the three months to Sept. 30, beating analysts’ average estimate of 63.06 billion rupees, Thomson Reuters data showed.

Income from operations rose 4.3 percent to 305.41 billion rupees from a year earlier.

TCS, part of salt-to-software conglomerate Tata Group, said it added 1 client in $100 million-plus category and six clients in the $50 million-plus category.

It added 15,868 employees in the quarter. The company said earlier this year it would increase local hiring in the United States as it prepares for possible change in the visa system for Indian workers.

Local brokerage Kotak said in a note to clients that TCS’ “vulnerable maintenance-heavy portfolio” is likely to remain a risk. It maintained a reduce rating on the stock.

TCS is the first among India’s software services exporters to report earnings for July-September. Smaller rival Wipro Ltd is scheduled to report next week.

Shares in TCS closed 1.9 percent higher ahead of earnings in a broader Mumbai market that ended 1.1 percent up.

Reporting by Sankalp Phartiyal and Tanvi Mehta in Bengaluru; editing by Elaine Hardcastle and David Evans

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