TCS Q1 net profit rises 5.2%, wage increase impacts operating margin

Revenue grows 16.2%

India’s biggest IT services company by market capitalisation Tata Consultancy Services Ltd. (TCS) said consolidated net profit for the first quarter ended June grew 5.2% to ₹9,478 crore from a year earlier. The company said it would focus on profitable growth in the coming quarters.

Net margin was at 18%. Revenue rose 16.2% to ₹52,758 crore while growth was 15.5% in constant currency (CC).

The North America market led with 19.1% growth in CC while among verticals, the retail segment expanded 25.1% in CC, the company said in a filing.

Operating margin, at 23.1%, contracted 2.4%. Stating that the quarter was challenging from a cost management perspective, Samir Seksaria, Chief Financial Officer, said the operating margin number “reflected the impact of the annual salary increase, the elevated cost of managing the talent churn and gradually normalising travel expenses.”

During the quarter, employees received salary increases of 5-8%, and top performers had received even bigger increments.

“However, our longer-term cost structures and relative competitiveness remain unchanged, and position us well to continue on our profitable growth trajectory,” he said.

The board announced a dividend of ₹8 per share, to be paid on August 3.