TCS misses estimates on rupee and employee costs

Bloomberg

Tata Consultancy Services Ltd narrowly missed analyst estimates as quarterly profit was hit by a volatile currency and unexpected rise in employee costs.
Asia’s largest software outsourcing provider reported a 24 percent increase in net income to 81.1 billion rupees ($1.2 billion) in the three months ended in December, compared with the 81.9 billion-rupee average of estimates. Sales came to 373.4 billion rupees. Despite headwinds from a volatile Indian currency and higher costs in some major markets, operating margins were “resilient,” Chief Financial Officer V. Ramakrishnan said in a statement.
TCS managed to lift earnings growth above 20 percent in the previous two quarters as well despite a challenging business environment. Like closest rival Infosys Ltd, it’s wrestling with clients’ changing technology needs and a shift toward automation. Other headwinds include curbs on the H-1B visas used to get Indian software workers into the key US market, the increased cost of localisation, employee training expenses and Britain’s exit from the European Union.
“After two consecutive strong quarters, margins appear softer because of currency fluctuations and higher-than-expected headcount,” said Sudheer Guntupalli, a Mumbai-based technology analyst at Ambit Capital Pvt. “Headcount additions are towards servicing future demand so all-in-all, it’s encouraging.”