Surpasses hiring target for the financial year, to take additional 12,000-15,000
Strong growth from the UK and Asia-Pacific along with the US, West Asia and Africa, made India’s largest information technology service provider Tata Consultancy Services report yet another better than expected quarter, both in terms of profitability and margin improvement.
Despite a weak third quarter, TCS reported net profit (India GAAP) of Rs 2,370 crore, up 29.9 per cent from Rs 1,823.9 crore in the same quarter last year. Revenue for the quarter grew 26. 3 per cent to Rs 9,663 crore from Rs 7,648.5 crore in the same quarter last year. It added 35 new clients.
After the lackluster Q3 numbers of Bangalore-based Infosys Technologies, the street was expecting TCS to post better numbers. Compared to Infosys that reported a volume growth of 3.1 per cent, TCS reported strong volume growth of 5.7 per cent.
TCS also managed to deliver better margins despite a volatile dollar and pound. The company’s operating margins at 28 per cent grew by 7 basis points (bps) sequentially. Its gross margins grew 26 bps, whereas its net margin was up 144 bps.
Unlike Infosys, management that sounded cautious about macro-environment, the TCS management seemed more positive. “Demand environment continues to be strong and we are focused on helping our customers become more efficient and plan for growth. Sharp focus on our strategy with rigorous execution discipline has helped us capture volumes, defend our margins and deliver another stellar quarter,” said N Chandrasekaran, CEO and MD.
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The growth was evident in the sequential numbers, too. TCS reported a net profit growth of 9.3 per cent on a quarter-on-quarter basis; and revenues grew 4.1 per cent.
TCS, which counts Citigroup and General Electric among its clients, said Asia-Pacific region grew 18.4 per cent and the UK by 12.1 per cent. The US and continental Europe grew 6.5 per cent. India and Latin America were a tad slow in growth due to higher discretionary spend projects.
Chandarasekaran said the company did see a pricing growth of 118 basis points. “Pricing will remain stable with an upward bias. We are seeing volume growth and are very happy with the deal wins and pipeline growth.”
TCS also saw a forex hedging gain of Rs 52 crore during the quarter which increased the other income component. The quarter under review had other income of Rs 192 crore. “Some of it is because of the forex gain of Rs 52 crore against loss of Rs 52 crore last quarter. Other income was also up due to yield on investments,” said S Mahalingam, Chief Financial Officer, TCS.
TCS again upped its hiring targets, representing that growth was back. The company said it will hire 12,000 – 15,000 employees during the fourth quarter. It added 20,219 people (gross) during the quarter, its highest addition yet, taking the total headcount to 1,86,914 at the end of the December quarter.
| BEATING FORECASTS | ||||||||
| Revenue | Net profit | |||||||
| (in Rs cr) | (%) | (in Rs cr) | (%) | |||||
| Q3’10 | Q3’11 | YoY | QoQ | Q3’10 | Q3’11 | YoY | QoQ | |
| TCS | 7648.5 | 9663.0 | 26.3 | 4.1 | 1823.9 | 2370.0 | 29.9 | 9.3 |
| Infosys | 5741.0 | 7106.0 | 23.8 | 2.3 | 1559.0 | 1780.0 | 14.2 | 2.5 |
“We have welcomed the highest ever number of new TCSers in a single quarter with a gross addition of 20,219 employees as we continued to support the company’s strong growth and business pipeline. Last quarter we said we would hire 50,000 people. We have already done that and we will add another 12,000 – 15,000 before the financial year ends,” said Ajoy Mukherjee, Vice-President and Head, Global Human Resources.
Utilisation in Q3 of financial year 2010-11 remained at 83.8 per cent (excluding trainees) and 77.1 per cent (including trainees). The attrition rate in Q3 for IT Services was 13.2 per cent (LTM). BPO registered attrition of 24.7 per cent (LTM) while overall attrition was at 14.4 per cent.