TCS tops expectations with 32% rise in net

Sees an increase in spending next year; to hire 10,000 more in 2010-11.

Tata Consultancy Services (TCS) today beat market expectations with a 32.1 per cent rise in September quarter consolidated net profit at Rs 2,169 crore, driven by growth across regions and sectors. Revenue rose 24.9 per cent to Rs 9,286 crore, compared to the year-ago quarter. The numbers are according to Indian Generally Accepted Accounting Principles.

The country’s largest information technology (IT) company also crossed the $2-billion mark in revenues and registered one of its highest sequential incremental revenue growth, of $210 million during the second quarter.

The company grew in double-digits in all major markets, with Europe leading the pack. TCS’s North American revenues crossed $1 billion. Among emerging markets, India led the Asia-Pacific segment, with growth of 25 per cent. Overall, the Asia-Pacific segment grew 15 per cent. All industry verticals grew in double-digits.

Sequentially, net profit was up 13.8 per cent, while revenue rose 13 per cent. In US dollar terms, net profit rose 29.7 per cent on a year-on-year basis, while revenue increased by 24.9 per cent.

“This was clearly a quarter of superior performance across the board, driven by volume growth of over 11 per cent. In uncertain economic conditions, our results are a milestone on the path to strong demand recovery. Our teams have displayed agility in responding to these opportunities across markets and more importantly, execute flawlessly. Along with this, we have improved our operating margins by 86 basis points, which is again one of the highest,” said N Chandrasekaran, chief executive officer and managing director of TCS.

Chandrasekaran said the demand recovery had been solid and shall continue. “If the demand environment continues to be robust, we may see a price increase towards the end of this financial year. All our key markets in the US, India, and Asia-Pacific have registered double-digit growth during this quarter.”

“I can’t comment on the future spend of clients, as it’s still early for them to decide on budgets. But from the initial discussions that we have had, there is going to be an increase in spending for the next year.” TCS added 30 new clients and won eight large deals. The company is chasing 11 large deals across regions. Operating margins stood at 28 per cent and were positively impacted by exchange rate movements (1.03 per cent), productivity gains (95 basis points or bps) and SG&A cost efficiencies (54 bps). It took a negative impact of 1.66 per cent due to additional pay-roll expenses.

“The numbers are very good. I think they have given a stellar performance compared to Infosys and have done so consistently,” said Viju George of J P Morgan.

The overall attrition rate was 14.1 per cent, compared to 13.1 per cent in the previous quarter of this financial year.
 

MEGABYTE PERFORMANCE
	Revenue (in Rs cr)				Net profit (in Rs cr)
	Q2’10	Q2’11	YoY (%)	QoQ (%)	Q2’10	Q2’11	YoY (%)	QoQ (%)
TCS	7,435	9,286	24.9	13	1,642	2,169	32.1	13.8
Infosys	5,585	6,947	24.4	12.1	1,535	1,737	13.2	16.7

TCS added 19,293 employees (including subsidiaries). “Given the recovery in business demand, I think we will hire a total of 50,000 employees this financial year. This is 10,000 employees more than what we had announced last quarter,” said Ajoy Mukherjee, vice-president - global human resources, TCS.

A volatile currency, however, played spoilsport. TCS reported a forex loss of Rs 41.7 crore. “With our major operating currencies continue to be volatile, we remain vigilant on this front,” said S Mahalingam, chief financial officer of TCS.