The Hindu Business Line : TCS posts muted growth on overseas project delays

Still upbeat: Mr S. Ramadorai (left), Managing Director & CEO, TCS, and Mr S. Mahalingam, Chief Financial Officer and ED, at a press conference in Mumbai on Monday.

Our Bureau

Mumbai, April 21

Tata Consultancy Services (TCS), the country’s largest software exporter, on Monday reported a muted growth of 4.15 per cent in its net profit for the fourth quarter, stung by project delays by some of its overseas clients as an upshot of the US credit crisis.

This was its slowest quarterly growth in the last one year, but TCS officials remain upbeat on future prospects on account of a healthy order pipeline.

The net profit for the quarter rose marginally to Rs 1,245 crore from Rs 1,195 crore in the year-ago quarter. The net profit dipped by about 6.17 per cent in comparison with the third quarter of the last fiscal.

“Specific clients, majority of them in the banking and financial services space are facing difficulty. This has resulted in delay of few transformational projects and postponements of some assured ramp ups,” said Mr N. Chandrasekaran, Chief Operating Officer.

The banking and financial services space, which has been reeling under the US sub-prime crisis for a couple of quarters, now accounts for close to 40 per cent of the software company’s revenues.

Mr S. Ramadorai, TCS’ CEO and Managing Director, said the US market still accounted for about 50 per cent of the company’s revenue.

The company posted a consolidated revenue of Rs 6,098 crore for the quarter, up by 18.13 per cent, from Rs 5,162 crore in the year-ago period.

“On a quarter-on-quarter basis, the operating profit margin has dipped by 120 basis points to 25.5 per cent from 26.7 per cent. Similarly, sales and general expense costs as a per cent of overall sales have increased to 21.1 per cent from 20.4 per cent,” said Mr Deepak Purswani, IT Analyst, Sharekhan Securities.

In spite of the turmoil in developed markets, TCS says that it is confident of continuing a healthy growth momentum going forward. The optimism for TCS stems from the fact that the company is currently pursuing about 25 large deals of over $50 million, said Mr Chandrasekaran, adding that 10 of these deals are from Europe.

TCS is engaging in partnership dialogues with clients who have delayed their engagements with TCS. On a full-year basis, the company has reported a robust 19.31 per cent rise in consolidated net profit after tax to Rs 5,026 crore from Rs 4,213 crore in the previous fiscal year. Net revenues were up by 22.36 per cent to Rs 22,863 crore (Rs 18,685 crore). The company’s stock hit an intra-day low of Rs 986.5, before closing at Rs 992.55, 0.83 per cent lower than its previous close on Friday’s trading session.

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