Tata Consultancy Services (TCS) Ltd.’s quarterly income matched the expectations of analysts. Even as the Covid-19 pandemic slowed worldwide economic development and spending.
Net profit dropped 0.8 per cent sequentially in the quarter ended March to Rs 8,049 crore. The software services exporter said in an exchange filing. Estimates collected by BloombergQuint from analysts had pegged the bottom line at Rs 8,219 crore.
TCS benefited from the rupee’s depreciation because it pays most of its customers in U.S. dollars. In addition, the lower variable wages charged to employees. Still, the loss of billings due to lockdowns in India and other emerging markets to control coronavirus spread have offset those gains.
In the last year, TCS added five new customers to the $100 million-plus band, increasing the total number of these customers to 49. The organization has also added six new customers to the $50 million plus band, and 25 new customers to the $20 million plus band.
The pandemic has contributed to labor disruption in India, several European countries and the U.S., which has had an effect on revenue. The outlook for 2020-21 is “hazy” for the Indian IT sector, as Covid-19 could trigger a decline in global spending, said Kotak Institutional Equities in a pre-earnings survey.
More Pain Ahead
The full effect of the lockdowns on coronavirus needs to be seen. Things are likely to get worse, according to Bank of America-Merrill Lynch. The lockdowns and economic instability translate into decreased client spending. Travel and lodging are likely to be seriously affected by the virus, it added.
The company’s customers too were anxious because of Covid-19’s widespread economic effects, TCS said.
Boon for Digital?
Still, TCS remains hopeful that there will be some positive effects from the current crisis. The organization expects a higher rate of adoption of emerging technologies arising from the crisis.
In addition, the company said its long-term profitability target of holding margin was “unshaken” between 24-26 percent. Promotions will proceed as long as the organization has agreed. It is not to pay salary increases as of now.