Friday, July 17, 2009

India's TCS Beats Speculations With 19 Pct Net Rise

. Friday, July 17, 2009

By stockOzone team

Tata Consultancy Services (TCS), India’s largest IT company, on Friday beat the Street, and declared a 19% rise in net profit for the first quarter, helped by cost-cutting and a weaker dollar. Net profit rose to Rs 1,534 crore compared to Rs 1,290.61 crore a year ago.

TCS also announced a 12%, year-on-year rise in its revenue to Rs 7,207 crore, compared with Rs 6,410.7 crore in the same quarter last year. It announced a dividend of Rs 2 per share.

Declaring the results, S Ramadorai, managing director & CEO, said, “The growth has come from increased offshoring, efficiency at projects and efficiency at the operational level. There is a constant effort to reduce the sales and general administration costs and take it to 19%.” The company reported forex losses of Rs 84.14 crore for the quarter.

The volumes grew by 3.4%, and there was an impact on pricing by 25 basis points, thus, impacting the margins by 33 bps. The margins improved by 95bps as the company leveraged offshoring.

TCS results come days after Infosys Technologies, India's second largest IT company, reported a 17% rise in Q1 profit at Rs 1,527 crore for the quarter. TCS joins Infosys in beating analysts’ estimates, after the Tata Group firm froze pay and capped hiring to cope with the global recession.

In terms of verticals, too, the April-June quarter of the financial year saw some stability in the core BFSI segment with the US leading the trend, while the UK and Europe are expected to stabilise in subsequent quarters. However, North America continued to maintain its share of revenues aided by a semblance of stability in the Banking, Financial Services and Insurance segment. TCS said that in Europe, demand uptake from recently acquired clients is helping sustain its growth momentum and the pipeline remains strong, while demand from the emerging markets is being driven by system integration and outsourcing engagements.

“There is some improvement in the US market in the BFSI sector and growth in retail, utility and media is visible. However, concerns in manufacturing, telecom, and hi-tech continue. We need to be cautious and the pricing pressure is expected continue for the financial year. However, TCS will try and maintain the pricing level,” commented N Chandrasekaran, chief operating officer & executive director.

TCS results came in after market hours, but the shares had already gone up by 3.13% on the Bombay Stock Exchange on Friday, closing at Rs 433.60.

During the quarter TCS added 26 new clients, and the share of revenue from the top 10 clients grew to 28%, as compared to 26.8% during the previous quarter. Citigroup’s captive BPO, which is now owned by TCS, grew marginally with two new clients, and is ramping up.

Disclosure: Author does not own any of the stocks discussed here.





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