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Paul Noronha

Higher growth: Mr S. Ramadorai, CEO and Managing Director, TCS, and Mr S. Mahalingam, Chief Financial Officer, at a press meeting in Mumbai on Monday. —

Our Bureau

Mumbai, Oct 15 With over 50 per cent of its revenues coming from new service areas such as infrastructure services, consulting and BPO, Tata Consultancy Services clocked a 22.8 per cent rise in net profit to beat street estimates for the second quarter ended September 2007. This was despite concerns on the US sub-prime issue as well as the appreciating rupee, said Mr S. Mahalingam, Chief Financial Officer, TCS, at a news conference here on Monday.

In fact, margins improved by 77 basis points from the first quarter, inclusive of a negative 30 basis point impact due to the appreciating rupee. A combination of cost management, greater offshoring (positive impact of 36 basis points), higher pricing and productivity (109 bps) as well foreign exchange hedging (79 bps) helped TCS report an operating profit margin at 24.85 per cent, said Mr Mahalingam.

Pricing on new contracts improved by between five per cent and eight per cent, while renewed orders fetched 3-5 per cent higher rates.

Volumes for the company grew by 8.19 per cent during the quarter.

All the newer service areas or non-application-development-maintenance offerings of TCS, have been growing at rates of between 10-35 per cent, said Mr N. Chandrasekaran, Chief Operating Officer. “Infrastructure management services grew by 33 per cent.” Contrary to fears that the US business might be affected, and that the banking and financial sector vertical might be impacted, TCS said BFSI, along with telecom and manufacturing verticals, grew faster than the average growth rate.

At the end of the second quarter, TCS is hedged for $2.6 billion with a hedge of $1.1 billion for deliveries for the period ending Dec. 31 at a little above Rs 40.50, said Mr Mahalingam. “With about 50 per cent of the overall growth coming from non-ADM offerings and an 85 basis points positive impact due to an improved pricing strategy the company commands a pricing premium, which is good news for investors,” said Mr Rishi Maheshwari, IT Analyst, Networth Stock Broking.

The TCS scrip closed at Rs 1,073.65 on BSE, 0.99 per cent higher from its previous close.

More Stories on : Financial Performance | Software | Financial Performance | Tata Consultancy Services Ltd

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