TCS Q3 net up 34% at Rs 1,824 cr

India's largest IT services provider, Tata Consultancy Services (TCS), beat the market expectations to post a 33.9 per cent jump in its net profit (consolidated Indian GAAP) at Rs 1,824 crore for the quarter ended December 31, 2009 as compared to the same period a year ago. Its revenue, too, jumped 5.1 per cent on strong volumes of 6.6 per cent to touch Rs 7,649 crore year-on-year (YoY).

On a sequential (quarter-on-quarter or QoQ) basis, TCS' net profit jumped 11.1 per cent while its revenue jumped 2.9 per cent. In dollar terms (consolidate US GAAP), TCS performed even better. Its revenue was up 10.3 per cent YoY and 6.3 per cent QoQ while its net profit rose by 38.9 per cent YoY and 14.2 per cent QoQ.

In comparison, Infosys' net profit (consolidated Indian GAAP) at Rs 1,582 crore declined 3.6 per cent (Q310) YoY while the company's net grew 2.7 per cent QoQ. The company's revenue, too, at Rs 5,741 crore declined 0.8 per cent YoY but grew 2.8 per cent QoQ.

TCS Chief Executive Officer and Managing Director , N Chandrasekaran, attributed the performance to his investments being "ahead-of-time in emerging markets".  S Mahalingam, chief financial officer, said: "We have continued to leverage all the margin improvement levers very effectively to deliver growth with higher profitability. This has been achieved in-spite-of significant currency head-winds". In rupee terms, the net margin of TCS increased by 176 basis points (bps) QoQ.

TCS' top 10 client share increased by 100 bps. The software giant from the Tata group outperformed all IT analyst expectations by posting a 33 per rise in net profit as against consensus estimates of 20 per cent. The company also reported other income of Rs 66 crore as against a loss of Rs 172 crore in the third quarter of the previous year. With the appreciation of the Indian rupee, the company's overseas business expenditure too reduced by Rs 143 crore.
 
Moreover, TCS recorded positive business growth across all verticals. As was the case with Infosys, TCS has seen demand recovery starting in the BFSI segment (which accounted for 45 per cent of its revenue in the quarter under review) has now become more broad-based, with telecom and technology also posting healthy growth. Strong client additions supported above-average revenue growth in the energy and utilities space, according to the TCS management.

Improving market sentiment also reflected in above average growth in the enterprise solutions segment.  TCS financial products group BANCS also continued to do well on the back of strong client additions through the year.

The growth momentum is also reflected across the portfolio of clients with 32 new client additions, growth in the number of active clients and additions of 7 clients in the over $5 million bracket. TCS signed 10 "significant" deals this quarter of which 7 were from North America, signalling a recovery. North America contributes 52.5 per cent to TCS' top line (57.1 per cent including Ibero America). Infosys, on the other hand, gets 66.6 per cent revenue from North America.

On the employee front, there was a gross addition of 12,854 employees (net addition of 7,692) in Q310. The utilisation rate improved to 81.1 per cent (excluding trainees) and 77.2 per cent (including trainees). The attrition rate in Q3 was at 11.5 per cent with attrition in IT services at 10.8 per cent and BPO at 18.3 per cent.

"We have had significant employee additions this quarter and still, have increased our talent utilisation to industry leading levels. We remain prepared to meet the growth in demand," said Ajoy Mukherjee, vice-president, head, global human resources.