The Hindu Business Line : Improved pricing, productivity lift TCS

Mumbai, Jan. 16 Improved pricing and productivity helped Tata Consultancy Services ride a tough quarter with 19 per cent increase in its consolidated net profit.

Net profit for the quarter amounted to Rs 1,327 crore, against Rs 1,130 crore in the same year-ago period. Revenues were up 22 per cent, at Rs 5,923 crore (Rs 4,873 crore).

Billing rates rose 53 basis points, while pricing and productivity improvements had a 125 basis point positive impact on the financials, said Mr S. Mahalingam, Chief Financial Officer, TCS, at a news conference on Wednesday.

Although the rupee (which appreciated 2.3 per cent during the quarter) impacted revenues by Rs 91 crore, the company’s hedging strategy resulted in a gain of Rs 130 crore during the period.

“The company continues to drive margins through rate and productivity efficiencies and keep a strong handle on costs,” Mr Mahalingam.

Employee utilisation was maintained at 77.7 per cent, said Mr S. Padmanabhan, Global Head, HR.

The operating profit margin was up by 33 basis points, at 24.16 per cent.

There was growth momentum across geographies with contributions from all business units, said Mr S. Ramadorai, CEO & MD, TCS.

The US contribution to revenues fell below the 50 per cent mark for the first time. Large outsourcing engagements are gaining strength in established and newer geographies like Asia Pacific, India, West Asia, Africa and Latin America, said Mr N. Chandrasekaran, COO.

On a standalone basis the company’s net profit rose by 24 per cent, to Rs 1,179 crore (Rs 951 crore). Net sales rose by 26 per cent, to Rs 4,834 crore (Rs 3,824 crore).

The board has recommended a dividend of Rs 3 per equity share of Re 1 each.

Preferential issue

The board approved a proposal to issue non-convertible redeemable preference shares up to an aggregate value of Rs 100 crore to Tata Sons, the promoters of the company. Mr Mahalingam said this must not be read as a prelude to a US-listing. “The preference issue is to meet certain fiscal regulations outside India,” he said.

It may be recalled that the promoter group had sold small stakes in TCS through 2006 and 2007, which analysts held was for financing the Tata Group’s acquisition of Corus. As on December 31, 2007, the promoter group’s stake in TCS was 77.78 per cent.

The TCS stock gained Rs 6.25 on Wednesday in a declining market, closing at Rs 944.50 on BSE.

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