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Business News/ Companies / Company-results/  TCS beats market forecast, net profit rises 45%
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TCS beats market forecast, net profit rises 45%

TCS posts net profit of `5,568 crore in June quarter; revenue rises 22.9% to `22,111 crore from a year ago

Shares in TCS, a unit of India’s diversified Tata conglomerate, ended 0.84% lower at `2,381.10 before the announcement. Photo: MintPremium
Shares in TCS, a unit of India’s diversified Tata conglomerate, ended 0.84% lower at `2,381.10 before the announcement. Photo: Mint

Mumbai: Tata Consultancy Services Ltd (TCS) reported sharp increases in fiscal first-quarter profit and revenue, beating analysts’ estimates, as India’s largest software services provider won more orders from customers in the US and Europe.

Net profit increased 45% to 5,568 crore in the three months ended 30 June from 3,840 crore in the year earlier. Revenue rose 22.9% to 22,111 crore from a year ago. The median of 40 analysts’ estimates compiled by Bloomberg had pegged TCS’s profit at 4,890 crore and revenue at 22,010 crore.

The company’s profit rose 3.9% from the preceding March quarter while sales grew 2.6%.

While TCS does not provide earnings forecasts, top executives said they were bullish on the prospects of the company and that of the $118 billion Indian information technology industry. The company, which counts Citigroup Inc., BP Plc. and AstraZeneca Plc. among its customers, expects demand for its services across its major markets to remain strong in the year to 31 March.

TCS has made a “promising start and in proving the management right about FY15 being better than FY14", said Sachin Shah, a fund manager with Emkay Investment Managers Ltd. Shah expects analysts to upgrade their earnings estimates by 2-2.5% for fiscal 2015 and fiscal 2016 “with EPS (earnings per share) of approximately 110 for FY15 and 120 for FY16".

TCS chief executive and managing director N. Chandrasekaran attributed the company’s June quarter performance to “robust volumes and healthy growth across all industries and key markets". He said growth was good in all markets except the Middle East and Africa, which he expected to pick up by the year end.

“We have a strong demand pipeline in place and our customer-centric mindset, leadership in the ‘digital’ space and strong execution capabilities will help us to sustain our momentum," he said.

TCS is chasing eight large deals, Chandrasekaran said, without giving details. In the June quarter, the company added five customers that will generate annual orders worth more than $50 million.

The management sounded confident of growing faster than the industry (13-15% growth forecast by Nasscom), said Ankita Somani, an analyst with MSFL Research Institutional Business Group. She added that TCS’s India revenue returned to growth (7.2% over the March quarter) “after two quarters of lacklustre performance".

“TCS has outpaced its peers on revenue and Ebitda (earnings before interest, taxes, depreciation and amortization) growth in the last three years, which we believe is sustainable," she said.

On 11 July, Infosys Ltd, India’s second-largest software services exporter, posted a net profit of $482 million in the June quarter, up 15.3% from $418 million a year ago. In rupee terms, the company posted a net profit of 2,886 crore on revenue of 12,770 crore.

Wipro Ltd will report its June quarter earnings on 24 July while HCL Technologies Ltd and Tech Mahindra Ltd will declare their respective quarterly earnings on 31 July.

On the occasion of the 10th anniversary of TCS’s initial share sale, the company’s board announced a special dividend of 40 per share.

TCS said it now employs 99,875 women employees, just 125 short of the 100,000 mark. The company also said on Thursday that women now comprise 32.7% of its 305,431 consolidated workforce, making it the largest employer of women among private sector companies. TCS had 98,122 women employees as on 31 March.

The company’s employee utilization rate, excluding trainees, was at an all-time high of 85.3% and that including trainees was 79.8%. The attrition rate (trailing 12 months), was at 12%.

TCS reported its earnings after the end of trading on Thursday in Mumbai.

Shares of TCS dropped 0.84% to 2,381.1 on the BSE, while the exchange’s benchmark Sensex gained 0.04% to close at 25,561.16 points and the BSE IT Index added 0.08% to 9,268.04.

Infosys gained 0.43% to 3,243.30, Wipro gained 0.45% to 537.85 and HCL Technologies dropped 0.01% to 1,466.30.

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Published: 17 Jul 2014, 05:55 PM IST
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