TCS Q3 consolidated net up 2.7% y-o-y at Rs 1,362 cr

India's largest IT services provider Tata Consultancy Services (TCS) recorded a net profit (consolidated Indian GAAP) of Rs 1,362 crore for the quarter ended December 31, 2008 -- up 2.68 per cent over the corresponding quarter figures of Rs 1,327 crore in FY07.

The net profit figure, however, was higher by Rs 41.53 crore due to lower depreciation charges.

Its revenues at Rs 7,277 crore, too, were up 24.13 per cent over the corresponding quarter figures of Rs 5,923 crore. The TCS management said currency volatility had hit the growth of its revenue in this quarter. The company suffered a forex loss of Rs 251 crore

Sequentially, its net profit was up 4.65 per cent while its revenues were up 7.10 per cent. The company's EPS stood at Rs 13.92, and it declared a quarterly dividend of Rs 3 per share -– its 18th consecutive quarterly dividend.

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In terms of markets, North America appears to be stabilising with TCS adding two new marquee customers during the quarter. TCS’ strong pan-European presence and category leadership in the UK helped the company significantly grow revenues in a sluggish market. Despite weak economic outlook, Latin America registered very strong demand, from both local companies and multinationals seeking GNDM capability. The Indian market continued to see low capital spend by both public and private sector clients.  Going forward government spending is expected to revive demand.
 
Consumer spending-led sectors like retail and media and entertainment exhibited resilience in the October-December quarter, while ramp-ups in large transformation deals signed in earlier quarters helped retail and life-sciences verticals show strong growth.
 
Chief Executive Officer and Managing Director, S Ramadorai, said: “In tough market conditions, TCS continues to perform in a stellar fashion, driving revenue growth through our diversified market presence and boosting our operational profitability by conserving costs and creating efficiencies.” 

S Mahalingam, Chief Financial Officer, said: “In the current environment, it is important to run a tight ship with cost control measures that can be sustained while continuing to invest for the future. We believe that the best course is to mitigate risks, move towards a sustainable and efficient cost base, continuously improve the collection process, and be prudent in cash and currency management.”

The company’s selling, general and administrative (SG&A) expenses reduced by 153 basis points (bps) implying it kept its cost under control. Its operating margins, however, rose just 53 bps.

 “In a challenging market, TCS remained focused on execution discipline and kept pricing stable and therefore managed to grow profitably.” said N. Chandrasekaran, Chief Operating Officer.  “We have closed some key deals across markets and sectors, acquired 41 new customers and have a healthy pipeline of deals across our diversified customer going forward.”
 
During Q3, there was a gross addition of 11,773 employees (net 8,692 employees) of which 8,704 were trainees and 1,696 were lateral recruits in India and 1,373 employees were added in overseas subsidiaries and branches. The total employee base was 130,343 professionals and 52 per cent of the workforce had more than three years experience.
 
The utilisation rate (excluding trainees) was 79.9 per cent and the attrition rate in Q2 dropped to 11.9 per cent overall with 11.2 per cent attrition rate in the IT services business and 20.5 per cent attrition rate in BPO. Foreign nationals formed 9.1 per cent of the total employee base and 30 per cent were women.

“We have added over 30,400 people in the first nine months which is in line with our hiring plans for the financial year. Our retention rates for both IT services and BPO have shown significant improvement in the current quarter. We continue to focus on improving utilization rates and employee productivity,” said Ajoy Mukherjee, Vice President & Head, Global Human Resources.