Growth across segments and regions beats market expectations

Tata Consultancy Services posted an estimate-beating 15.5 per cent rise in consolidated net profit for the first quarter ended June 30, backed by growth across business segments.

The country’s largest software exporter also recorded growth across regions other than India in what is usually a strong quarter.

In the reporting quarter, TCS’ net profit rose to Rs 3,831 crore from Rs 3,318 crore in the same quarter a year ago. The IT major’s revenues rose 21 per cent to Rs 17,987 crore (Rs 14,869 crore).

“This quarter was driven by the highest volume growth during the past seven quarters. It has been an all-round performance with strong revenue growth across markets led by the US,” TCS Managing Director and Chief Executive Officer N. Chandrasekaran said.

Consistent margins

Dipen Shah, head of private client group research at Kotak Securities, said that TCS’ net profits were higher than what analysts expected.”

The highlight was the 6.1 per cent volume growth… Margins improved despite salary hikes, which is creditable. The company has been reporting above-average volume growth consistently and has been able to sustain margins,” he said.

For the Mumbai-headquartered company, growth came mainly from segments such as life-sciences, retail, telecom and banking, financial services and insurance. In terms of markets, good growth was registered in the US, Europe and the UK.

On the rupee, TCS Chief Financial Officer Rajesh Gopinathan said: “Volatility is what we do not like. We hope it settles down in a range so that we can plan better.”

The company’s attrition rate fell to 10.52 per cent on a ‘last twelve-month’ basis. During the quarter, TCS added 10,611 people (net addition of 1,390), taking its total employee strength to 277,586. In India, the company continues to see lumpiness in business, with revenues falling 4.6 per cent quarter on quarter.

“Here, we have more systems integration kind of projects and less of annuity revenue (assured annual revenue) deals. Cannot tell you when things will change,” Chandrasekaran said.


“The order pipeline has been strong… We maintain we will grow faster than Nasscom’s projection of 12-14 per cent this year,” Chandrasekaran said, referring to the software industry body’s expectation of IT exports rising 12-14 per cent this year. The outlook is normal for this year, he said, adding that the first two quarters would be better than the next two. On Thursday, TCS shares ended down 0.82 per cent at Rs 1,660.15 on the BSE.

(This article was published on July 18, 2013)
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