Riding on sustained growth in its key markets and industry segments, Tata Consultancy Services (TCS) has registered a 45 per cent jump in its first-quarter net profit, beating industry estimates. The bottomline was also boosted by a one-time gain of ₹490 crore.

TCS’ consolidated net profit increased to ₹5,568 crore during the quarter ended June 30, from ₹3,839.5 crore in the corresponding year-ago period. Net revenue rose 22.9 per cent to ₹22,111 crore (₹17,987 crore).

The US, Europe, UK and India markets grew by over 5 per cent, N Chandrasekaran, Chief Executive Officer and Managing Director, said at a news conference here on Thursday.

“Robust volumes and healthy growth across all industries and key markets helped TCS start the new financial year on a strong note. All industries have delivered growth with the exception of insurance,” he added. However, Chandrasekaran stressed that muted growth in the insurance space was not a cause for concern.

Margin pressure The company’s margins were under pressure during the quarter, as it dished out wage hikes of 10 per cent while dealing with an appreciating rupee.

The exchange-rate movements had a negative impact of 73 per cent on margins while the impact of salary hikes caused a dip of 219 basis points, said Chief Financial Officer Rajesh Gopinathan.

Hence, the operating profit margin went down to 26.3 per cent from 29.15 per cent in the previous corresponding quarter.

Dipen Shah, Head-Private Client Group Research, Kotak Securities, said: “TCS’ results were above estimates. The highlight of the results was the 5.7 per cent volume growth, which was better than expectations. Consistent high-volume growth reflects effective demand-generation initiatives and efficient execution for TCS”.

One-time gain Effective April 1, 2014, TCS has revised its policy of providing depreciation on fixed assets, resulting in a one-time gain of ₹490 crore, as per Indian accounting standards.

TCS recorded a write-back of ₹665 crore and a charge of ₹175 crore in depreciation due to a change in the ‘useful life of assets’, as of April 1.

However, under International Financial Reporting Standards, the company said it would take a one-time hit of ₹174.6 crore.

Special dividend On the occasion of the 10{+t}{+h} anniversary of TCS’ initial public offering, the company’s board of directors announced a special dividend of ₹40 per share.

Ahead of the results, TCS shares closed at ₹2,381.10 on the BSE, down 0.84 per cent.

Related Topics
comment COMMENT NOW