Profit, revenue at TCS continue to shrink

Profit, revenue at TCS continue to shrink
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First Published: Tue, Apr 21 2009. 12 31 AM IST

Slowing growth: TCS’ offshore development centre in Noida, near New Delhi. Harikrishna Katragadda / Mint
Slowing growth: TCS’ offshore development centre in Noida, near New Delhi. Harikrishna Katragadda / Mint
Updated: Tue, Apr 21 2009. 12 31 AM IST
Mumbai/Bangalore: Tata Consultancy Services Ltd (TCS) India’s largest software provider, reported profit growth slowed for a ninth straight quarter as the global recession forced customers to pare orders.
Net profit rose 4.7% to Rs1,310 crore in the three months ended 31 March, from Rs1,260 crore a year earlier, Mumbai-based TCS said after market hours on Monday. Profit compared with the Rs1,330 crore median estimate in a poll of 21 analysts compiled by Bloomberg.
Slowing growth: TCS’ offshore development centre in Noida, near New Delhi. Harikrishna Katragadda / Mint
Revenue rose 19% to Rs7,172 crore, under US accounting rules. That compared with the Rs7,410 crore median of analyst estimates.
TCS’ financial performance in the March quarter, the fourth in the fiscal year gone by, lagged on a sequential or quarter-on-quarter basis. Revenue, which according to company chief financial officer S. Mahalingam included Rs359 crore from a Citigroup Inc. back office unit TCS bought in October, fell 1.45% from the December quarter. If revenue from the acquisition was not included, sales would have been lower at 6.34%.
Fourth quarter net profits were lower 2.4% sequentially.
Net profit for the full year (fiscal 2009) was Rs5,256 crore, up 5%, and revenue Rs27,813 crore, an expansion of 23%.
The company said its board had recommended a one-for-one bonus issue of shares and a dividend of Rs14 a share.
“By focusing on operational efficiencies, collecting cash more efficiently and driving an enterprise-wide cost control programme, we have improved our profit margins and continue to generate significant cash-flows,” chief executive officer S. Ramadorai, who retires in October, said in a statement.
He faces the most difficult conditions in his 13-year reign as the global recession prompts customers to spend less and defer software projects. Second ranked Infosys Technologies Ltd last week projected the first decline in annual dollar sales in the company’s history after clients delayed orders.
Indian software exporters need to ensure that they don’t offer too much by way of discounts to retain business, Srividhya Rajesh, who supervises the equivalent of $520 million (Rs2,600 crore) in equities including Tata Consultancy stock at Sundaram BNP Paribas Asset Management Co., said by telephone from Chennai before the announcement.
Shares of TCS fell 2% to Rs561.40 in Mumbai trading. The stock has declined 43% in the past 12 months compared with a 34% drop in the benchmark Sensitive Index.
TCS expects pressure from customers to reduce prices to continue in the current fiscal year.
“We are factoring in a pricing decline of lower single digits,” chief operating officer N. Chandrasekaran told a news conference in Mumbai.
TCS, which took in hedging losses of Rs192 crore in the last quarter, reduced employee costs by Rs121 crore in the quarter, said Chandrasekaran.
TCS may also face stiffer competition after smaller rival Tech Mahindra Ltd last week won the bidding for control of Satyam Computer Services Ltd following a Rs7,136 crore accounting scandal at the Hyderabad company.
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Nesil Staney of Mint contributed to this story.
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First Published: Tue, Apr 21 2009. 12 31 AM IST