Financial Daily from THE HINDU group of publications
Tuesday, Apr 18, 2006
Financial Daily from THE HINDU group of publications Tuesday, Apr 18, 2006 |
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Info-Tech - Outlook TCS sees stable margins despite hike in salaries Our Bureau
Expects uptick The company was seeing an uptick in pricing with new client wins. Operating margins fell to 24.9 per cent in the fourth quarter. Revenues from the Pearl Group BPO operations have started flowing.
Bangalore April 17 Tata Consultancy Services (TCS) expects its margins for fiscal 2006-07 to remain stable despite an increase in the salaries. TCS effected a 15 per cent wage hike for its offshore employees and a 3-5 per cent hike for its onsite employees from April 1. The TCS Executive Vice-President, Mr N. Chandrasekharan, told analysts in a post-earnings call that the company was seeing an uptick in pricing with new client wins, whereas the pricing with existing contracts that were up for renewal was stable. The company expects to maintain the margins through increased offshore leverage and by moving more work to its global delivery centres, he said. Mr S. Padmanabhan, Global head of HR, said the 11 per cent wage hike implemented last year did not have any impact on the margins. Further, he believes that the wage hike would not have any impact on the margins this year too.
Operating margins fall
TCS' operating margins fell to 24.9 per cent in the fourth quarter from 26.3 per cent a year ago largely due to the impact of the rupee appreciation and the merger of less profitable Tata Infotech Ltd. Further, the operating margins declined sequentially by 1.25 per cent over the previous quarter. TCS saw a volume growth of 8.2 per cent during the fourth quarter in absence of any pricing growth, said Mr S. Mahalingam, CFO. The company took a small hit of Rs 18 crore due to the impact of rupee appreciation, which was offset by the increase in other income during the quarter. In a bid to hedge its receivables against the currency volatility, the company has taken options for $500 million and a forward cover for $115 million, he said.
Pearl group deal
Revenues from the mega deal with Pearl Group have started flowing during the fourth quarter of fiscal 2006. TCS has seen a revenue flow of about £6 million during the quarter mainly from the transformation of the business.
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