The Hindu Business Line : TCS net rises 43.5 pc

REVENUE BOOST: Mr S. Ramadorai (right), CEO & MD, TCS, and Mr S. Mahalingam, Chief Financial Officer, at news conference in Mumbai on Monday. — Paul Noronha

Mumbai , Oct. 16

Tata Consultancy Services has reported a 43.5 per cent increase in its consolidated net profit for the second quarter ended September 30, 2006. The company gained from increased offshore revenues, rising billing rates and cost efficiencies.

Net profit grew to Rs 1,019 crore in the quarter from Rs 694 crore in the corresponding year-ago quarter. This was on the back of a 52 per cent increase in revenues of Rs 4,495 crore (Rs 2,951 crore).

"The growth in profitability was led by a strong growth of 50.5 per cent in international business, with offshore leveraging helping us raise operating profit margins in a 300 basis points (3 percentage point) show," said Mr S. Ramadorai, CEO and Managing Director, at a news conference on Monday.

Offshore revenue

Offshore revenues increased to 41 per cent of total international revenues, up from 38.1 per cent a year ago, said Mr S. Mahalingam, Chief Financial Officer, TCS. "This led to a 67 basis points increase in the EBITDA margin. Another 50 basis points came in terms of foreign exchange gain, while the rest came from cost efficiencies." Profit before interest depreciation and tax rose 42 per cent to Rs 1,270 crore.

Higher pricing

The price improvement for the quarter was a little over one per cent. New contracts are showing a 5-10 per cent increase in pricing, while existing contracts are being renewed at a pricing of 3-5 per cent higher, said Mr Mahalingam.

The company was negotiating on five projects of over $50 million while several other large projects were being pursued.

The contribution of revenues from GE to total revenues decreased by 0.8 per cent over the immediate previous quarter, though absolute figures were not immediately available, he said.

The momentum in offshore shift will continue, and this will lead to increased margins, said TCS officials.

"We have crossed the Rs 1,000-crore mark in terms of quarterly net profit, and we are likely to hit a boundary for $4 billion in revenues this year," said Mr Ramadorai.

The board has declared a dividend of Rs 3 per share.

The TCS scrip rose on the bourses, ahead of the announcement of the second quarter results, gaining by Rs 25.7 or 2.33 per cent on the BSE over the previous trading day's close of Rs 1,104.75, to finish the day at Rs 1,130.45.

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