TCS net beats Street estimates

Mumbai, Jan 14: Tata Consultancy Services (TCS), the country's top software services exporter, today beat Street estimates by posting a 26.7 per cent increase in net profits at Rs 3,551 crore in the third quarter ended December 31.

It had earned a net profit of Rs 2,803 crore in the same period last year.

There was considerable pressure on TCS to deliver robust results, particularly after rival Infosys came out with a strong set of third quarter numbers and upped the revenue guidance for the full year.

Moreover, the Tata group company has consistently put in a better performance and beaten analysts forecast over the past few quarters, earning it the sobriquet of the IT bellwether.

Analysts had expected TCS to post net profits in the region of Rs 3,200 to 3,400 crore.

Revenues rose 21.7 per cent to Rs 16,070 crore in the third quarter from Rs 13,204 crore in the year-ago period

"We have had an excellent quarter of well rounded performance," said TCS chief executive officer and managing director N. Chandrasekaran, attributing it superior execution in a seasonally weak quarter.

"We had good revenue growth, balanced across service-lines, industries and geographies."

Chandrasekaran said the company witnessed good growth in the US and emerging markets such as India and Latin America. Industry segments such as manufacturing, retail, utilities and infrastructure showed a positive growth.

Moreover, the customer migration was also strong with the company adding two $100 million clients during the quarter.

Geographically, North America showed a sequential growth of 2.5 per cent (it now accounts for 52.6 per cent of revenues), while Latin America showed a jump of nearly 11 per cent. Though the UK showed a rise of 5.2 per cent in the same period, Continental Europe witnessed a drop of 2.4 per cent. However, the Indian market showed a growth of 4.8 per cent.

Energy and utilities and manufacturing provided the strongest industry contribution, followed by banking, financial services and industry and retail.

Chandrasekaran said there were some constraining factors during the quarter which had fewer working days in the US and more furloughs arising from company shutdowns during the Christmas period to control budgets.

Yet, TCS was successful in churning out a strong performance because of superior execution and productivity improvement. As a result, operating margins rose 56 basis points to 27.3 per cent.

The TCS CEO was optimistic about performance in the next quarter. He expected IT spends to increase in the next fiscal. "The good momentum is likely to continue," he added.

He said TCS should be in a position to beat the upper end of the 11 to 14 per cent revenue growth forecast that industry forum Nasscom had made for the current fiscal year.

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