Mumbai, Oct. 15: The technology titans have started to rock once again.
Tata Consultancy Services (TCS), the country’s largest software exporter, today reported an almost 34 per cent jump in net profits at Rs 4,701.8 crore in the second quarter ended September 30.
In the same period last year, it had recorded a net profit of Rs 3,512.3 crore.
Analysts had expected the company to report a net profit in the region of Rs 3,500 crore.
Companies in the IT sector had been expected to make big gains because of the 11 per cent depreciation in the rupee during the quarter against the dollar. The market has a thumb rule: a 1 per cent depreciation in the rupee boosts margins of these companies by around 30 basis points.
But TCS still had a few surprises for investors. For a start, its operating margin rose to an all-time high of 30.2 per cent, up sharply from the nearly 27 per cent in the preceding quarter. A large part of the jump in this margin was because of the depreciation of the rupee.
TCS also posted a volume growth (increase in number of man-hours billed) of 7.3 per cent on a sequential basis, which is the highest in nine quarters.
Revenue growth in dollar terms stood at nearly $3.34 billion, a jump of 5.4 per cent over the previous quarter and 17 per cent on a year-on-year basis. In rupee terms, revenues during the quarter stood at Rs 20,977.2 crore, a growth of 34.3 per cent over the same period last year.
Last Friday, Bangalore-based Infosys reported a net profit number of Rs 2,407 crore for the second quarter ended September 30, up from Rs 2,374 crore in the year-ago period. The Street gave a thumbs up to the company when it revised its dollar revenue growth guidance for the year to 9 to 10 per cent from 6 to 10 per cent earlier.
TCS chief executive officer and managing director N. Chandrasekaran said the robust numbers had come on the back of all-round growth across markets and industries, highlighted by efficient and rigorous execution.
He said strengths of TCS were its well-diversified portfolio and a footprint that spread across key geographies. As a result, the company had been successful in winning deals that were also evenly distributed.
The quarter saw TCS signing eight large deals across verticals even as it added three clients in the $100-million plus category.
Chandrasekaran added that while there was a strong performance from the financial services vertical, it hoped to maintain margins in the region of 26 to 28 per cent for the rest of the year. Investors read that as a veiled hint that they ought not to expect the company to maintain an operating margin of 30.2 per cent in the current quarter.
He was, however, quick to add that the company had not witnessed any slowdown in the US and that discretionary spending had been strong. The TCS honcho said while the pricing environment was likely to remain stable, the diversified revenue sources would be the key to growth.
Life sciences, media, energy & utilities, and banking, financial services & insurance were the verticals that spurred growth at the technology giant.
While all the core markets grew, Europe, North America and the UK led the pack.
There was a total gross addition of 17,362 people (net addition of 7,664 employees) taking the total employee strength of 285,250 employees on a consolidated basis. The attrition rate was stable at 10.9 per cent including BPO. The attrition rate in IT was at 9.9 per cent, while BPO attrition was higher at 16.3 per cent.