TCS to top $5 billion revenue this year

Mumbai-based Tata Consultancy Services (TCS) is well poised to cross the $5 billion revenue mark in the financial year 2007-08, given the current annual growth rate that averages 25 per cent.

Though the largest Indian IT services provider does not provide any guidance to investors, if one accounts for its half-yearly revenues of Rs 10,843 crore, one can safely assume that the company will touch the Rs 20,000 crore mark by the financial year-end. The third quarter is historically better for the company.

Moreover, TCS has become the first India-based IT firm to cross the landmark of 100,000 employees. It added 9,268 (net) employees this quarter.

TCS Chief Executive Officer and Managing Director S Ramadorai said: "Our strategic investments in new services such as consulting, infrastructure and platform-based BPO as well as new markets are helping us accelerate growth and diversify our revenue base, thereby reinforcing our full services capability."

Over 50 per cent of its second quarter revenues came from new services "� services other than the traditionally strong application, development and maintenance (ADM) services.

S Mahalingam, chief financial officer of the company, said: "Our focus remains on twin pillars of growth and profitability. We remain confident that our hedging programme (outstanding forex cover is $2.6 billion) and cost management levers will help us expand margins during the rest of the year."

TCS' revenue growth was driven by strong growth in the banking and financial services, telecom and manufacturing verticals, which grew faster than the average company growth rate.

Travel and hospitality is also fast emerging as a key vertical, contributing 4.4 per cent of the revenues, up from 2.8 per cent in the previous quarter as a result of significant client additions. North America contributed 52.2 per cent to its revenues, while its top-10 clients contributed 27.6 per cent to the revenues.

The rupee appreciation of around 1.7 per cent against the dollar was a slight dampener, while salary hikes (wage inflation) "� which were effected in the first quarter of the current financial year "� affected the profit margins by 117 basis points (1.17 per cent).

Hedging, though, made a positive contribution of 0.86 per cent to the revenue, while pricing changes "� 3-5 per cent on renewals and 5 per cent upwards for new clients "� added another 0.85 per cent to the top line.

The company's operating margins overall improved by 0.77 per cent. TCS also added 51 new clients this quarter. It signed three new $50 million deals (one of them in the BFSI segment) and has 20 deals worth over $50 million in the pipeline.

"We remain on target to meet our annual hiring plans and have added over 12,000 employees (gross) this quarter," said S Padmanabhan, executive director, human resources. The net addition of employees was 9,268. TCS also added 966 employees in overseas subsidiaries and branches.

TCS' attrition rate remained steady at 11.5 per cent overall with 10.9 per cent attrition rate in the IT services business and 17.9 per cent attrition rate in the BPO. Foreign nationals formed 8.5 per cent of the total employee base and 28 per cent were women.