TCS's digital bet starts to show results

The group said around 250 roles will transfer to Indian giant Tata Consultancy Services, although they will remain based at the firm's IT headquarters at Stockley Park in Middlesex

TCS's digital bet starts to show results

Tata Consultancy Services (TCS), the country's largest IT software exporter, has reported a 1.3 per cent increase in its net profit for the October-December 2017-18 quarter, at Rs6,531 crore ($1.01 billion), on a 3.9-per cent increase in revenues to Rs30,904 crore ($4.79 billion).

In dollar terms under the International Financial Reporting Standards, net income at $1,012 million is 1.2 per cent up annually and 1.1 per cent up quarterly, while revenue grew 9.1 per cent annually but flat (1 per cent) quarterly at $4,787 million.

To be sure, India's software industry is set to face additional challenges in the US this year, with a new tax being imposed on payments made by USA companies to its foreign affiliates.

TCS said the move will help the insurer transition to a simplified, cloud-enabled platform based on its BaNCS platform, which will help new product development, provide enhanced services, acquisitions, and strategic innovation investments.

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"We're very optimistic about a faster and stronger turnaround in insurance", Chief Executive Rajesh Gopinathan told reporters in Mumbai, adding that banking segment recovery was a little more unpredictable.

But the numbers are stark. A year ago, the digital business contributed 16.8% to TCS's overall revenue.

"We don't see any significant tailwind in cross-currency to support the topline growth and margins for tier-1 companies".

The Indian company will migrate the administration of over 10 mln insurance policies on to its BaNCS platform and provide "third party administration" or TPA services to the U.S. company.

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To be clear, TCS is not alone in strengthening the digital business-Infosys and Wipro, too, are ramping up their digital businesses as clients push for more transformative services than just cost-savings outsourcing deals. Approximately 250 of M&S's current 430 IT staff will now be employed by TCS, though will continue to work from the retailer's Stockley Park, London offices, according to a company statement; meanwhile, a spokeswoman said that M&S is "not moving any additional services offshore as a result" of the deal.

TCS also reported good performance in continental Europe, which contributes 11.1% of the total revenue.

"Major global currencies were fairly stable during Q3FY18 and accordingly we do not expect currencies to materially affect revenue growth or margins", it said in its report.

Consolidated revenue came in at Rs 30,904 crore in Q3FY18, registering growth of 3.86% year-on-year (YoY) and 1.18% quarter-on-quarter (QoQ) basis.

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