Europe, Asia-Pacific drive sales growth; India revenues dip marginally

Propelled by high demand for IT outsourcing services across Europe and the Asia-Pacific, Tata Consultancy Services (TCS) posted a 48.18 per cent jump in net profit for the fourth quarter.

The net profit and revenue of Asia’s largest software exporter were largely in line with consensus estimates.

The company, also India’s largest back-office firm, recorded a net profit of ₹5,357.6 crore on a consolidated basis in the quarter ended March 31.

In the year-ago quarter, the Mumbai-based company had posted a net profit of ₹3,615.6 crore.

Geography-wise, TCS recorded maximum sequential revenue growth from Continental Europe (up 5 per cent), followed by the UK (2.6 per cent) and Asia-Pacific (2.4 per cent).

All service offerings of the company grew more or less in line with the overall growth rate, said N Chandrasekaran, Managing Director and CEO.

Nine big contracts in the bag

During the quarter, TCS won nine large outsourcing contracts, apart from 18 new deals in the digital space, he added.

Rikesh Parikh, Vice-President (equities) at Motilal Oswal Securities, said TCS’ numbers were “marginally below” the brokerage firm’s expectations, but broadly in line with the general consensus.

The fourth quarter is generally a moderate period for the IT industry as most clients are in the budgeting phase for the next fiscal year. According to Chandrasekaran, TCS is seeing increased discretionary spending — technology initiatives that are desirable but not critical — among its clients for digital initiatives.

TCS’ revenues from India dipped marginally in the March quarter. Its domestic business has been flat due to the uncertainty ahead of the general elections.

“We think that the India business will improve from the current levels, but we will have to wait for the first two quarters to see how it pans out,” said Chandrasekaran.

For the full year that ended March 31, TCS reported a 38 per cent increase in net profit at ₹19,164 crore (₹13,917 crore) while revenue went up 30 per cent to ₹81,809 crore.

Positive Outlook

TCS has painted a rosy picture for 2014-15, indicating that its growth would be higher than industry body Nasscom’s prediction of 12-14 per cent. “We are upbeat that the next 12 months will bring many more opportunities for growth across multiple industries and markets,” Chandrasekaran said.

Ahead of the earnings announcement, the TCS scrip fell 2.51 per cent to ₹2,195 on the BSE, on Wednesday.

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(This article was published on April 16, 2014)
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