Beats market expectation; topple Infosys in terms of Ebitda margins for the first time.
India’s largest information technology (IT) services company Tata Consultancy Services (TCS) beat market expectation and delivered a strong set of numbers for the first quarter ended June 30 for the financial year 2011-12, driven by an all-round growth across verticals and geography.
For the first time, the company went ahead of competitor Infosys in terms of earning before interest, taxes, depreciation and amortisation (Ebitda).
TCS reported a net profit (India GAAP, generally accepted accounting principles) of Rs 2,415 crore, up 26.7 per cent from Rs 1,906 crore in the corresponding quarter last year. On a sequential basis (trailing quarter ended March 31) the company's net profit saw a dip of 7.9 per cent from Rs 2,623 crore.
Revenue for the first quarter grew 31.4 per cent to Rs 10,797 crore compared to Rs 8,217 crore on a year-on-year basis. Sequentially, revenue grew 6.3 per cent.
From the June quarter, TCS has started following International Financial Reporting Standards (IFRS). Based on it, its net profit for the quarter at Rs 2,380 crore was up 27.7 per cent from Rs 1,863 crore in the corresponding quarter last financial year, but sequentially it was flat.
It once again beat Infosys in terms of performance and margin management with a volume growth of 7.4 per cent. Infosys had a volume growth of 4 per cent in the quarter.
“The first quarter marks a milestone in TCS' evolution. A 26.2 per cent Ebitda margin for the quarter makes TCS the highest margin company in the IT services industry, overtaking Infosys, which has held the mantle so far. On the revenue side too it continued its growth leadership posting a massive 7.4 per cent quarter-on-quarter growth in dollar-revenues,” said a CLSA note on the firms performance.
In terms of dollars, TCS' revenue grew 34.4 per cent to $2.41 billion — and net profit rose 30.6 per cent year-on-year to $532 million. The company had a forex hedge gain of Rs 80 crore.
Even though its operating margins declined to 26.1 per cent from 28.3 per cent in the previous quarter, it managed its salary rise impact better than Infosys. Operating margins of both companies were impacted due to salary rise. While TCS saw an impact of 213 basis points (bps) on its margins, Infosys margins fell by 290 bps.
| DRIVING THE NUMBERS | |||||||
|
Company | Revenue | Pat | Ebidta (Q1) | ||||
| Q1 (cr) | Y-o-Y (%) | Q-o-Q (%) | Q1 (cr) | Y-o-Y (%) | Q-o-Q ) (% | ||
|
TCS | 10,797 | 31.4 | 6.3 | 2,380 | 27.7 | 0 | 28.10% |
|
Infosys | 7485 | 20.8 | 3.2 | 1722 | 15.7 | (5.3)* | 29.06% |
| (The above figures are according to IFRS accounting. Infosys does not provide for India GAAP numbers) * represent a decline | |||||||
Despite a better than expected results, the management was cautious about the global uncertainty.
“The macroeconomic environment continues to be volatile and uncertainty is a reality. However, we do not see any decline in the business momentum and hope to capture the opportunities that are emerging. We need to be flexible and agile to adapt to such changes,” said N Chandrasekaran, CEO and MD.
The company added 24 clients during the quarter. Of these, 10 were large deals, five of which came from North America (US & Canada).
Unlike some of its peers, the management sounded much more bullish on future growth. “We have a good pipeline. Rather, we have a good mix of transformational deals even from the discretionary spend side,” he said.
On pricing the company said that while they are yet to see an increase, pricing so far has not declined either. Of the top 15 deals that the company is pursuing four each were from the US and UK and Europe and one each from emerging markets like India, Latin America, West Asia and others.
