India's TCS sees margin improvement after expenses dent quarterly profit

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FILE PHOTO: Logos of TCS are displayed at the venue of the annual general meeting of the software services provider in Mumbai
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BENGALURU (Reuters) -Tata Consultancy Services Ltd said on Friday it expects margins to improve on a sequential basis after the top Indian IT exporter missed quarterly profit estimates by a wide margin as employee-related expenses soared.

TCS is the first among its domestic peers to report earnings, with investors looking to gauge the outlook for the sector which has had a stellar run in the past couple of years with companies expanding their digital offerings during the pandemic.

Deal pipeline and closures continue to be strong, TCS Chief Executive Officer Rajesh Gopinathan said in a media call, adding that the company remains vigilant given global uncertainty driven by factors including fears of an economic slowdown and the Russia-Ukraine war, among others.

Last month, global peer Accenture Plc forecast fourth-quarter revenue below expectations and tempered its fiscal 2022 profit view, threatened by rising inflation and the impact of a stronger dollar on its overseas earnings.

Mumbai-based TCS reported its net profit rose 5.2% to 94.78 billion rupees ($1.20 billion) in the three months to June 30, compared with analyst expectations of 98.51 billion rupees, according to Refinitiv data.

Operating margin for the quarter stood at 23.1%, down from 25.5% a year earlier, mainly due to the impact of annual salary increases, elevated cost of managing the talent churn and gradually normalizing travel expenses.

Revenue from operations jumped 16.2% to 527.58 billion rupees.

TCS shares, down 12.7% so far this year, ended 0.7% lower ahead of results.

($1 = 79.2570 Indian rupees)

(Reporting by Nallur Sethuraman in Bengaluru; Editing by Vinay Dwivedi)

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