TCS profit up 23%, revenue tops $10 bn

TCS profit up 23%, revenue tops $10 bn
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First Published: Tue, Apr 24 2012. 01 03 AM IST

Engineering recruits undergo training at the Tata Consultancy Services Ltd. training center in Trivandrum, India. Bloomberg
Engineering recruits undergo training at the Tata Consultancy Services Ltd. training center in Trivandrum, India. Bloomberg
Updated: Tue, Apr 24 2012. 01 03 AM IST
Mumbai: The country’s largest information technology (IT) services provider, Tata Consultancy Services Ltd (TCS), became the first Indian IT company to cross the $10 billion mark in annual revenue, even as it posted results in line with market expectations for the March quarter.
TCS posted a net profit of Rs 2,932 crore, up 22.6% year-on-year and 1.6% compared with the trailing quarter. Revenue grew 30.5% from a year ago to Rs 13,259 crore, but a mere 0.4% from the preceding quarter, according to International Financial Reporting Standards.
But the company’s 3.3% fourth quarter volume growth, 1.3% increase in full-year pricing and the management’s positive outlook indicated that Infosys Ltd’s disappointing March quarter results don’t reflect the prospects of the overall Indian IT outsourcing story.
On 13 April, India’s second largest IT services provider shocked the markets with a poor revenue forecast of 8-10% growth in dollar terms for fiscal 2013 (FY13), lower than industry body Nasscom’s forecast of 11-14% growth.
Engineering recruits undergo training at the Tata Consultancy Services Ltd. training center in Trivandrum, India. Bloomberg
On the other hand, though TCS does not give estimates, N. Chandrasekaran, chief executive officer and managing director, said the company expects to grow faster than Nasscom’s projections for the industry.
“We are well prepared to achieve balanced growth across industries and markets we operate in,” he said.
TCS made a revenue of $10.17 billion in 2011-12.
Market analysts reacted positively to TCS’s commentary and its March quarter volume growth. Infosys reported a decline of 1.5%, while HCL Technologies Ltd reported a volume growth of 1.9% for the same period.
There are several positives in the TCS results, said Ankita Somani, a technology and telecom analyst at Angel Broking Ltd.
“They are better than the industry estimates and also of their peers which have announced results so far. Its volume growth is very decent and the fact that it has announced an 8% offshore wage hike means the traction the company is seeing in terms of business is not as bad as projected by Infosys,” Somani said. “The hiring target of 50,000 people in the current financial year is also very strong, the management is also not as cautious about the environment vis-à-vis its peers. All in all, the results are very positive, and we suspect if these companies are eating Infosys’s market share.”
Somani said the only disappointment was TCS’s operating margin, which fell by 150 basis points sequentially. A basis point is one-hundredth of a percentage point.
Dipen Shah, head of fundamental research at Kotak Securities Ltd, echoed this view.
“TCS’s results were in line with estimates on the revenue and profit fronts. The 3.3% volume growth was encouraging in a tough macro environment,” he said. “Management is also pretty confident of growing above the Nasscom average growth rate for FY13. We understand the company has adequate visibility on customer spends and its own market share within that spend. TCS remains our preferred pick in the large-cap space.”
TCS added 42 clients and struck six large deals in the fourth quarter. Its North America business rose 1% sequentially to account for 53.6% of its overall revenue. The company’s UK business, accounting for 15.2% of revenue, rose 1.6%. But business in continental Europe, accounting for 9.8% of its total revenue, fell 6.2%. The India business was up 1.6% to account for 8.5% of the overall revenue.
TCS’s banking, financial services and insurance segment accounted for 42.2% of its revenue, down 2% in the March quarter sequentially. Telecom was down 0.3% at 10%, while retail and distribution grew 2.4% and accounted for 12.5% of the overall business.
The firm added a net 11,832 employees in the March quarter. Its overall attrition rate stood at 12.2% and the utilization rate (excluding trainees) at 80.6%. Utilization including trainees stood at 71.3%, said Ajoy Mukherjee, executive vice-president and head (global human resources). TCS has completed its campus hiring process in India for FY12, he said.
Earnings per share stood at Rs 14.98, up from Rs 14.75 in the third quarter. The company recommended a total dividend of Rs 25 a share, including a proposed Rs 8 as final dividend and Rs 8 as special dividend.
The TCS stock dropped 2.77% to close at Rs 1,059.25 on BSE on Monday, as the benchmark Sensex fell 1.6% to end at 17,096.68 points. The results were declared after market hours.
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First Published: Tue, Apr 24 2012. 01 03 AM IST
More Topics: Company Results | TCS | Software | Technology | Tata |
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