TCS freezes lateral hiring as revenue drops 6% in June quarter

India’s largest software exporter Tata Consultancy Services (TCS) reported 4 percent drop sequentially and 6.3 percent dip on a year-on-year basis to Rs 38,322 crore in revenue in the June quarter of 2020.
TCS NetherlandsRajesh Gopinathan, CEO and managing director, TCS, said that the revenue impact of the pandemic played out broadly along the lines the company had anticipated at the start of the quarter.

“It affected all verticals, with the exception of life sciences and healthcare, with varying levels of impact. We believe it has bottomed out, and we should now start tracing our path to growth,” he said.

The life sciences, healthcare, pharmaceuticals verticals maintained growth trajectory and were growing in mid-teens numbers growing at about 13.8 percent. Most of the other verticals have been impacted due to the overall economic impact of the pandemic.

The company’s largest vertical, banking and financial services and insurance, saw a 4.9 percent decline in revenues. Revenue from insurance business sector fared better, followed by capital markets and banking which were seeing a short-term impact and would recover in the second half of the year.

“Retail and hospitality have seen the maximum impact. The demand destruction in this vertical is significant,” he said.

Europe, which was on a significant growth trajectory, maintained momentum albeit impacted by the pandemic. The US was among the most impacted. The UK market was affected by the twin impact of Bexit and the Covid-19 pandemic.

“Looking at the uncertainty, the company has frozen lateral hiring but the company will honour all outstanding offers.”

Rajesh Gopinathan said the IT services company was actively contacting all the 40,000 offers that it made an engaging with them and preparing them to on board July onwards. “Looking forward, depending on the demand environment, we have also decided to selectively open up lateral hiring and started onboarding new associates,” he said.

TCS profit dips

TCS has reported 13.8 percent fall in net profits after the country’s coronavirus lockdown disrupted its operations and pushed Western clients to cut spending, AFP reported.

The Mumbai-headquartered firm said its consolidated net profit plunged to 70.09 billion rupees ($934.94 million) for the three months to June 30, lower than the $1.06 billion projected by a Bloomberg survey of analysts.

India’s decision to impose a months-long nationwide lockdown in March caused huge disruption across the IT sector, forcing firms such as TCS to rapidly adopt a work-from-home model to cater to clients in Western markets.

“The revenue impact of the pandemic affected all verticals, with the exception of life sciences and healthcare, with varying levels of impact,” TCS chief executive Rajesh Gopinathan said in a statement.

“We believe it has bottomed out, and we should now start tracing our path to growth,” he added.

TCS, India’s second-most valuable company, was at the forefront of an IT boom that saw the country become a back office to the world as firms in developed nations subcontracted work, taking advantage of a skilled English-speaking workforce.

TCS earns more than 80 percent of its revenues from Western markets including Britain, the United States and Europe.

But the COVID-19 pandemic has battered demand for the firm’s services in the financial and banking sectors.

“Covid-19 impact has pushed companies to lower their IT spending and TCS revenues reflect this trend which will continue for the next quarter,” Baburajan K, editor of industry news website TelecomLead, told AFP.

Rival firms Infosys and Wipro also depend heavily on Western markets for their revenues and are expected to report quarterly results soon.

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