Five takeaways from TCS results

India's largest software company Tata Consultancy Services (TCS) posted a 48.2% jump in net profit for March 2014 quarter as compared to that of the previous year. While the numbers look attractive on a year-on-year comparison, it does not look as good when compared with the previous quarter. The company managed to grow its net profit by only 0.5% when compared with its sequential quarter.

 

More than the broad bottomline comparison, details furnished by TCS reveal a clearer picture of the company.

Here are the key takeaways from TCS March 2014 quarter numbers:

 

1. Revenue grew by 31.2% on a year-on-year basis and 1.2% as compared to previous quarter. All major industry verticals grew in double digits, while in term of geographies Europe contributed the most. The sequential quarter revenue growth however, comes on the back of a 2.9% volume growth, signifying pricing pressure. This is also reflected in EBIT margins which has come down from 29.75% to 29.3%.

 

 

2. Unlike Infosys' high attrition rate of 18.7% TCS has seen a far lower attrition rate of 11.3%. Apart from fewer exits the company has added 9,751 employees during the quarter taking the annual addition of 24,268 employees (Net) during the year. A 10% hike in wages for their Indian employees has also helped in retaining talent. The impact of the wage hike will be felt in the current quarter.

 

3. More importantly, TCS management has said that they would be adding 55,000 employees during the year FY15. The bullishness in employee addition is also reflected in management's interaction with media where they have commented on a better prospect over the next 12 months. The company expects higher growth from BFSI and retail space in the current year.

 

4. On Indian market, TCS repeated what it said earlier that growth has been slow in FY14. For FY15 the company expects Indian business to improve further and does not view it declining further.

 

5. For those who compare Infosys with TCS, after a 29.9% growth in revenue in FY14, TCS management has said that they expect FY15 to be much better. Compared to this we have Infosys management raising their guidance to a growth of 7-9%, much lower than the 13-14% growth that Nasscom has been talking for the industry.