Mumbai/Bangalore: Tata Consultancy Services Ltd (TCS), India’s largest information technology company, carrying over volume growth and high operating margins from the previous quarter, beat estimates by posting a net profit of Rs2,369 crore for the quarter ended December, up 9.3% quarter-on-quarter, and 30% year-on-year (y-o-y).
That exceeded estimates of Rs2,200 crore. Revenue rose to Rs9,663 crore, up 4.1 % sequentially and 26.3% y-o-y. It declared a quarterly dividend of Rs2 per share, and earnings per share of Rs12.08. In dollar terms, revenue rose 7% to $2.14 billion (Rs9,758 crore today), while profit came in at $517 million, up 14% sequentially and 35% y-o-y.
“They have beaten our expectations,” said Dipen Shah, senior vice-president at Kotak Securities Ltd. “In a seasonally weak quarter, the volume growth of 5.7 % is encouraging and the improvement in operating margins is a positive surprise.”
The gap between TCS and its peers is widening, said Abhishek Shindadkar, an analyst at ICICI Securities Ltd. “Clearly, they have done a better job of managing headwinds. They look a really cohesive unit, reinvigorated under Chandra (chief executive officer and managing director N. Chandrasekaran).”
Infosys Technologies Ltd turned in low single-digit sequential growth in revenue (2.29%) and net profit (2.5 %), at Rs7,106 crore and Rs1,780 crore, respectively, for the quarter.
Srishti Anand, analyst at Angel Broking Ltd, said she had expected volume growth at 7%, but TCS “overperformed our expectations on margin and PAT (profit after tax). A Rs52 crore forex gain this quarter vis-a-vis a forex loss last quarter helped in a stronger PAT”.
Chandrasekaran said a “sharp focus on strategy, with rigorous execution discipline, has helped capture volumes, defend margins and deliver another stellar quarter. Demand environment continues to be strong.”
Chief financial officer S. Mahalingam said pricing and productivity were improving. “We continue to live with currency volatility, but we leveraged strong cost management efforts to sustain margins,” he said.
TCS rose 1.57% to Rs1,136.30 on the Bombay Stock Exchange on Monday. Results were announced after the market closed.
Volume growth at 5.7% is in contrast with the 11% seen in the last quarter, while operating margins continued to see the highs of Q2 at 28%. In the quarter, 35 new clients were added.
“Keeping in mind that TCS is the leader of the pack, we expect Wipro too to disappoint on the volume front,” Anand of Angel Broking said. Wipro is to announce results later this week.
TCS added a record 20,219 staffers, a net addition of 12,497, for a total strength of 186,914 as of 31 December. Attrition was marginally up to 14.4% from 14.1% in the previous quarter.
The company said that growth was led by developed markets in the US and Europe, while Asia-Pacific, West Asia and Africa were also growing. Last quarter, North American revenue alone crossed $1 billion and the company posted double-digit growth across verticals. Net profit had risen by 14% sequentially, and 32% y-o-y. Europe and the UK continued to show growth, Chandrasekaran said.
Offshore revenue rose 30 basis points to 51.4%.
Key wins for the quarter included firms in telecom, pharma and healthcare, banking, and airlines. New services such as assurance and infrastructure services were showing good growth, the company said.
With inputs from Surabhi Agarwal in New Delhi.