CMC Q1 net declines 4% on heavy subcontracting cost

Revenues up 13.4% at Rs 672 cr, due to surge in orders from Systems

Tata Consultancy Services (TCS) subsidiary CMC posted Rs 56.28 crore net profit for the quarter ended June 30, 2015, a decline of 3.7 per cent compared with Rs 58.42 crore reported in the same period a year ago as large subcontracting and outsourcing cost eroded its profit margins.

During the same period, the India-focused information technology company reported Rs 672.24 crore revenue, up 13.43 per cent from Rs 592.63 crore in the corresponding quarter in 2014-15 backed by around 17 per cent jump in orders from Systems Integration (SI) business.

 

Systems Integration is the process of linking together different computing systems and software applications physically or functionally.

Its subcontracting and outsourcing expenses shot up 18.9 per cent to Rs 303.27 crore in the same period, from Rs 255.12 crore spent in the previous comparable quarter apart from other expenses such as employee benefit cost and purchase of hardware.

The firm also posted disappointing numbers on quarterly basis as net profit slipped from Rs 70.57 crore in the January-March period to Rs 56.28 crore in the April-June period, a drop of 20.4 per cent. It had earned Rs 666 crore as revenue in last quarter of 2014-15, which improved by a per cent to Rs 672.24 crore in the first quarter of current fiscal.

In a separate notice filed to the Bombay Stock Exchange (BSE) today, CMC has informed that a meeting of the board of directors of the company will be held on July 16 to consider declaration of an interim dividend to the shareholders.

Incorporated in 1975, CMC has over 11,000 employees and is a leading system engineering and integration company in India. TCS took a controlling stake in CMC in 2001 and fully privatised it three years later. Last year, the IT major had announced merging CMC with self and got exchange approval this January.