 "TCS Q3 numbers in line; volume growth of 1.8% disappointing")
Though the December quarter numbers were in line with expectations, volume growth of 1.8% was disappointing.
TCS reported net profit of Rs 5,314 crore for the quarter ended December 31, 2013 up 49.6% year-on-year and 13% sequentially (quarter ended September 30, 2013). Net profit for the quarter were aided by a forex gain of Rs 299 crore, compared to a forex loss last quarter.
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Revenue for the quarter was up 32.5% year-on-year at Rs 21, 294 crore; sequentially too the company saw its revenue go up by 1.5%, ahead of Bangalore based Infosys, but lower than HCL Technologies.
TCS saw growth across verticals and geographies, baring India that de-grew by 9%. “Strong international demand for our services and discipline in execution has helped TCS maintain its momentum and post robust growth in volumes as well as realisation.
Our diversified market presence and services portfolio have helped us overcome seasonal weakness and soft demand in the Indian market,” said Chief Executive Officer and Managing Director, N Chandrasekaran.
The volume growth of 1.8% was lower than expectations and what the company has been delivering over the last few quarters. The company attributed this fall to de-growth in India business. The third quarter is generally slow due to holidays, and furloughs.
The company reported opearting margins of 29.7% for the quarter, lower than last quarter. The company attributed this fall to reinvestment of gains from margin into the business.
“We have been able to maintain our profitabi lity by operating in a disciplined manner while sustaining our investments in customer-facing initiatives globally. We have also been able to significantly increase our cash generation due to efficient working capital management.,” said Rajesh Gopinathan, Chief Financial Officer.
TCS continued its uptick in hiring and upped the numbers to 55,000 from its earlier stated 50,000. This is reflective of the demand environment. TCS also stated that initial discusion with client suggest a better year ahead. There was a total gross addition of 14,663 people (net addition of 5,463 employees) taking the total employee strength of 290,713 employees on a consolidated basis.
The utilization rate (excluding trainees) was at 84.3% and that including trainees was 77.5 %. The attrition rate (LTM) was stable at 10.9% including BPS. The attrition rate in IT was at 10.3 %, while BPS attrition fell to 13.4 %.
“Based on initial discussions with our customers we believe 2014 will be a stronger year for us than 2013, as customers execute their business plans in a relatively stable environment. With Digital technologies rapidly changing the way an enterprise operates in multiple dimensions, our continuous investments positions us well to help customers reimagine their business,” said Chandrasekaran.
Growth in Q3 was driven by industries like Life Science & Healthcare, Manufacturing, Media, Travel & Hospitality and Telecom. The company’s broad based presence across markets and services helped overcome seasonal weakness in some markets. Europe led growth, driven by the continuous investments being made in that market, while North America and UK also grew during the quarter.
Among growth markets, Latin America, APAC and MEA registered strong growth. India business suffered from volatility and declined sequentially. Among service lines, Business Process Services, Enterprise Solutions, Global Consulting were the leaders.