Mumbai, Apr 21: An increase in IT-spends by clients across key business segments, coupled with favourable currency movements, has propelled Tata Consultancy Services to report a 31.1 per cent surge in net profit for the fourth quarter ended March 31, 2010.
Net profits for the quarter under review stood at Rs 2,623 crore, as against Rs 2,001 crore recorded in the same quarter a year ago. Revenues grew by 31.3 per cent to cross the Rs 10,000-crore mark for the first time (in a quarter) at Rs 10,157 crore. Revenues in the corresponding period last year stood at Rs 7,738 crore.
“TCS has developed a reputation for superior execution and that is why it is seeing traction with customers. The company has managed to drive processes that insulate the quality of services rendered to clients from vagaries such as attrition, technology changes etc,” said Mr Vikash Jain, Partner of outsourcing advisory firm Everest Group.
The country's largest software exporter added 39 new customers in the quarter gone by. In the last two quarters, TCS has been successful in pushing customers to increase the pricing of both new and existing IT contracts, said Mr N. Chandrasekaran, Managing Director and Chief Executive Officer.
The deal closures have come across verticals of financial services, retail, hi-tech amongst others. A good chunk of the IT spends, both from new and existing customers, is coming from the ‘discretionary' budgets of clients, said Mr Chandrasekaran.
(Discretionary spending is done by the CIO, or IT decision maker, at his discretion – and this falls outside the annual IT budget.)
In constant currency terms, the US market grew by 31.3 per cent for TCS. Its bread-and-butter financial services business growth was in line with the company growth rate.
TCS' numbers were aided by the Indian rupee which had depreciated against the US dollar and other global currencies in the fourth quarter. The forex environment had a positive impact of Rs 120 crore on TCS' topline, said Mr S. Mahalingam, Executive Director and Chief Financial Officer.
All these factors helped the company maintain its operating profit margins at 28.3 per cent. Since the company has announced plans to give wage hikes to all its staffers, analysts feel TCS' margins will come under pressure in the current quarter.
However, Mr Mahalingam is confident that the current margin levels could be maintained over a ‘period of time'. Volume growth, at 2.9 per cent, was lower compared to the last few quarters.
For fiscal 2012, TCS – which counts bellwethers like Citigroup, General Electric and British Airways as clients – is confident of maintaining the growth momentum.
“A poll that we conducted with our customers shows that their IT spend this year is going to be higher than last year. Moreover, we are chasing more deals this time than we were last year around the same time,” said Mr Chandrasekaran.
For the full year ended March 31, 2011, TCS' net profit grew by 29.9 per cent to Rs 9,068 crore (Rs 7,001crore) while revenues grew 24.3 per cent to Rs 37,325 crore (Rs 30,029 crore)
TCS will give a total dividend of Rs 14 per share, including a proposed final dividend of Rs 8.
The company scrip was down by over 2 per cent to close at Rs 1,191.65 on the Bombay Stock Exchange on Thursday.
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