TCS beats the Street, net up 45%

BS 200 SCORECARD

Tata Consultancy Services (TCS) beat market expectations to become the first Indian IT company to clock over Rs 4,500 crore ($1 billion) in revenues in a single quarter even as it posted 44.9 per cent y-o-y increase in net profit of Rs 1,116 crore (Indian GAAP) for the quarter ended December 31, 2006.

Total revenues increased by 40.72 per cent to Rs 4,873 crore in the same period.

The biggest IT firm thus crossed the $3 billion revenue mark in the first three quarters itself, registering 8.42 per cent sequential increase in revenues (Indian GAAP) and 9.56 per cent q-o-q increase in net profit.

Despite a rising rupee in the third quarter, the company's US GAAP revenues rose 40.78 per cent y-o-y to touch Rs 4,860 crore ($1.1 billion) and 12.3 per cent sequentially.

Its net income grew 42.75 per cent to touch Rs 1,104.70 crore ($250 million). Its EPS rose from Rs 10.41 in the previous quarter to Rs 11.40 in this quarter and the company declared a dividend of Rs 3 a share.

TCS executives attributed the company's performance to a good business mix of onshore and offshore activities and continued better pricing.

The company's offshore business comprised 41.6 per cent of its total revenues in the third quarter, while 4 per cent was from global delivery centres (GDCs), and the remaining from onshore activities.

CEO and MD of TCS, S Ramadorai said: "We've had another quarter of exceptional performance. This shows that TCS' full-services model is `delivering a sustained profitable growth quarter on quarter in the midst of a dynamic operating environment."

The company's billing rates for new businesses registered a 4.9 per cent growth. S Mahalingam, chief financial officer, said: "We managed high growth rates with margin improvement and we have put the platforms in place to leverage current cost levels for higher revenues on an ongoing basis."

"Our global network delivery model operations ramped up 30 per cent in non-India GDCs during the quarter and are providing global customers with delivery certainty," he added.

TCS closed two deals worth $100 million each and five deals of over $50 million in the third quarter.

The IT major added 55 new customers this quarter and is expecting 10 more big deals of over $50 million over the next two quarters.

Strengthening its foray into the Chinese and Latin American geographies, this quarter, TCS signed a comprehensive transformation and outsourcing deal for $140 million with a leading Latin American private bank for 5 years.

Moreover, along with FNS, it won approximately $100 million core banking deal with a Chinese bank and a multi-year application development and support contract for $90 million with Australia's leading airline.

The company is currently building a trading platform for the China money market, like the one developed for NSE. It is expected to be completed sometime next year. The details were not revealed.

On the human resources front, TCS saw an attrition rate of 10.8 per cent which is the lowest among IT firms.

"In the context of a global workforce, we are winning the talent game as the company with the best retention rate in the industry," said S Padmanabhan, global head of human resources.

There was a gross addition of 7,835 (net 5,562) employees during the third quarter. In India, there were 2,478 campus hires and 4,015 lateral hires.

The total employee strength of the company was 83,500, with employees coming from 60 different nationalities. Non-Indian nationals formed 8.8 per cent of the total employee base and 25 per cent were women.

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BILLION DOLLAR BONANZA

Total revenues at Rs 4,873 crore ($ 1.1 billion) up by 8.42% Q-o-Q

Net profit at Rs 1,116 crore ($252 million) up by 9.56% Q-o-Q

EPS up from Rs 10.41 in previous quarter to Rs 11.40 in Q3

Dividend of Rs 3 per share announced

7,835 employees joined the company in Q3