TCS net up 4.15% YoY, down 6.17% QoQ

MIXED BAG IN FOURTH QUARTER

Weak volumes took their toll on Tata Consultancy Services Ltd, India's largest software-services company, which reported financial results for the quarter ended March 2008.

The company's net profit rose 4.15 per cent to Rs 1,245 crore as compared to the same quarter of the previous year, while revenue was up 18.13 per cent to Rs 6,098 crore. Compared to the previous quarter (third of 2007-08), its net profit was down 6.17 per cent.

Except for Satyam Computer Services, which posted 7.7 per cent net profit growth quarter-on-quarter, all the other tier-I information technology firms (Infosys, HCL and Wipro) reported poor sequential growth numbers. The three firms have recorded low sequential growth in revenue as well. 
 

Company	PAT			Revenue
	Q4 (Cr)	YoY (%)	QoQ (%)	Q4 (Cr)	YoY (%)	QoQ (%)
TCS	1245.00	4.15	(-6.17)	6098.00	18.13	2.95
Infosys	1249.00	9.20	1.46	4542.00	20.40	6.35
Wipro	880.00	3.00**	3.00	5700.00	32.00	7.50
Satyam	466.85	18.60	7.70	2416.00	35.80	10.00
HCL *	342.50	3.90	2.90	1944.80	23.30	7.10
* HCL announced its Q3 results ** Adjusting for one-time tax reversals in Q407, Wipro's PAT growth would be 11.3%

For the full year, TCS reported 19.31 per cent growth in net profit to Rs 5,026 crore, while its revenues grew 22.36 per cent to Rs 22,863 crore.

N Chandrashekaran, chief operating officer and executive director, TCS, attributed the drop in sequential net profit to "some delays in the confirmation of projects and some assured ramp-ups are getting delayed by a quarter or so." In fact, the Chilean government has cancelled its 10-year, Rs 280-crore deal awarded last month.

Three of the company's five top clients in the banking and financial services sector deferred contracts, exacerbating investors' concerns about the slowdown in the US, its largest market.

Banks, financial service providers and insurers accounted for 44 per cent of Tata Consultancy's sales in the fourth quarter. The world's biggest banks and securities firms have reported credit losses and asset writedowns exceeding $255 billion.

TCS does not provide any guidance. However, S Ramadorai, the chief executive officer and managing director, said the company "will watch the external environment closely, especially in the US, even as it is confident of a good 2008-09".

TCS' strategy of focusing on new markets to de-risk itself against a slowdown in the US showed good results in the quarter. Revenues from new markets like the Asia-Pacific, India, West Asia and Africa grew 41 per cent to $1.1 billion. UK revenues breached the $1 billion mark and Continental Europe crossed $500 million.

The revenue loss on account of the 11 per cent appreciation in the rupee vis-à-vis the dollar in 2007-08 resulted in a revenue loss of Rs 1,850 crore for the company, while wage inflation impacted its margins by 370 basis points.

The company said it will increase salaries 10 per cent in 2008-09. Its selling, general and administrative expenses increased by 213 bps. Its operating margins stood at 24.59 per cent.

At the end of 2007-08, TCS' total employee strength stood at 111,407 with a gross addition of 35,672 and a net addition of 22,116 during the year. Its employee utilisation rate is around 76 per cent (including trainees).

The company has made 22,451 campus offers for 2008-09 including over 4,000 science graduates for its science-to-software transformation programme, Ignite.