TCS numbers stun market

Net profit dips; Sensex feels the heat.

Tata Consultancy Services' (TCS) net profit, on a consolidated basis and after one-off items declined by 1 per cent to Rs 464.9 crore during the quarter ended March 2005, compared with Rs 470 crore in the same quarter of 2003-04.

However, on a sequential basis (March 2005 over December 2004), the net profit was down 34.5 per cent from Rs 709.33 crore in the immediately preceding quarter ended December 31, 2004.

TCS has recommended a final dividend of Rs 5 per equity share of Re 1, amounting to a dividend of 500 per cent per share. Together with the interim dividend of Rs 3 per share, the company has approved an 800 per cent dividend payout for 2004-05.

The revenue for the quarter was up by 26.8 per cent to Rs 2,584.55 crore compared with Rs 2,037.54 crore during the corresponding quarter last year, but almost flat compared with the revenue of Rs 2,578.43 crore in the quarter ended December 2004.

The company said these figures had been compiled according to the generally accepted accounting practices (GAAP). However, in a notice to the Bombay Stock Exchange (BSE), TCS said, "The group has posted a net profit of Rs 471.79 crore for the quarter ended March 31, 2005 and total income was Rs 2561.04 crore in the quarter."

The notice on the BSE website did not specify whether the figures were according to Indian GAAP or US GAAP.

On the bourses, the TCS stock slumped 8.34 per cent following the results, dragging down other information technology stocks and the benchmark indices with it.

The TCS stock hit an intra-day low of Rs 1,180, down nearly 10 per cent from Monday's close, before closing at Rs 1,209.75. Investor wealth of Rs 5,303 crore was wiped out in today's sell-off.

The Bombay Stock Exchange Sensex dropped from the day's high of 6269.75, up 113 points over Monday's close, to finally end 21.92 points lower at 6,134.86.

The drop in TCS share price was based on a profit figure of Rs 611.60 crore, which was flashed by a foreign wire agency during the market hours.

This figure appearing in the text of the media statement was rejected outright by the company's top executives at a press conference. The actual net profit figure of Rs 464.9 crore was known only after markets closed.

"Had the actual net profit figure been disclosed during market hours, the fall in the Sensex could have been sharper," a broker pointed out.

Brokers said TCS' flat performance on a sequential quarter basis (March 2005 over December 2004) vindicated the fears that global growth was slowing down and that information technology stocks would be the first to face the heat. "The numbers are way below street expectations," said a senior analyst with a domestic broking firm.

The sell-off on the TCS counter spilled on to other technology stocks as well. The Satyam Computer stock was down 4.63 per cent to Rs 367.85, while Wipro ended 2.99 per cent lower to close at Rs 576.95. However, the Infosys Technologies stock ended 0.11 per cent higher at Rs 1,914.10, but off the day's high of Rs 1974.

Among sectoral indices, the BSE IT index was the biggest loser today, down 2.38 per cent to 2346.47. Since the announcement of Infosys results on March 14, 2005, the BSE IT index has lost 9.9 per cent in the last two trading sessions, losing Rs 23,578 crore in market capitalisation.

Commenting on the performance at the media conference, S Ramadorai, TCS managing director and chief executive officer said, "In the fourth quarter, foreign currency revenues were booked at lower rupee rates, thereby impacting revenue and profit growth during the period under review. The net profit has been arrived at after an additional charge of Rs 102 crore towards EVA-based incentive plan for employees. Also, the company suffered a loss of Rs 10.71 crore on forward cover."

TCS has become cash-positive and its cash and cash equivalents stood at Rs 266 crore on March 31, 2005.

For the full year 2004-2005, net profit after one-off items increased 25.36 per cent to Rs 2,052.13 crore compared with Rs 1,636.91 crore in 2003-04. Revenues crossed the $2 billion mark in 2004-2005, at Rs 9727.23 crore against Rs 7122.72 crore in 2003-2004.

Further, the Company said its wholly owned subsidiary in Sweden-- Tata Consultancy Services Sverige AB -- will be acquiring 100 per cent stake in Swedish IT Resources AB ('SITAR'), a sales and marketing partner of the company in Sweden.