TCS net up 7%; to give 1:1 bonus

Written by Corporate Bureau | Mumbai | Updated: Apr 21 2009, 07:22am hrs
Indias largest IT company, Tata Consultancy Services (TCS), on Monday declared a 7% rise in net profit for the fourth quarter of 2008-09, at Rs 1,333 crore, in line with market expectations. The company announced a bonus issue in the ratio of 1:1, subject to regulatory approvals. This is in addition to a total dividend of Rs 14 per share.

Announcing the results, S Ramadorai, managing director & CEO of TCS, said, in an unpredictable operating environment, TCS has delivered healthy topline growth of 23% and crossed the $6-billion milestone in revenues. By focusing on operational efficiencies, collecting cash more efficiently and driving an enterprise-wide cost control programme, we have improved our profit margins and continue to generate significant cash flows. Even after the recent cash acquisitions, we have cash of nearly Rs 4,300 crore.

The TCS results come five days after Infosys Technologies, the second largest IT company, predicted a drop in its 2009-10 revenues by 6.7% to 3.1%. The lower guidance was interpreted by the stock markets as an indication that the global financial meltdown has taken its toll on the outsourcing business and that the earnings of TCS and Wipro Technologies would be weak.

TCS acknlowedged that it is facing pressure from its clients to rework prices. N Chandrasekaran, chief operating officer & executive director, said, We have seen pricing pressures with a decline of 44 basis points across FY09 and we expect a lower, single-digit impact on the pricing next year as well. Of our top 100 clients, 40-45% are reporting a decline in revenues and 50% of them are reporting a decline in profits. So, some of these clients are looking at price negotiations and some are looking at other options.

The results came in after market hours, but TCS stocks had already dipped 2.21% on the Bombay Stock Exchange on Monday, to close at Rs 560.40, anticipating a fall in net profit dip on a quarter-on-quarter basis.

Total revenues of TCS for the quarter were up 18.5% year-on-year at Rs 7,172 crore. But compared with the previous quarter, its Q4 profits dipped 2% and revenues 1.5%. The company reported forex losses of Rs 192 crore for the quarter.

Consolidated net profit for the full year ended March 31, 2009 grew 4.58% to Rs 5,256.42 crore against Rs 5,026.02 crore in FY08. Income from operations during the year stood at Rs 27,812.88 crore, up 22.96% from Rs 22,619.52 crore.

TCS closed 28 large deals during 2008-09, and acquired 163 new customers.

Of these, 24 were in the $50-million plus band, compared to 19 in FY08. TCS revenues from retail and manufacturing verticals crossed $500 million each, and revenues have begun to flow in from its $512-million acquisition of Citigroups Captive BPO (now renamed TCS e-Serve). TCS hired 48,595 employees in FY 2008-09, and the net addition to staff during the year stood at more than 32,000. Seven large deals were struck in the fourth quarter, of which six came from the US.

The firms North America revenues crossed $3 billion, a growth of 26%, while revenues in continental Europe was up 39%. New growth markets like APAC, LatAm, and the Middle East & Africa grew at 16%.

With significant recurring revenues and investments in new growth markets of Asia and Latin America yielding results, we continue to invest in the future by building people competencies and new technologies as well as solutions for emerging areas like sustainable energy, healthcare and customer analytics, Ramadorai added.

The company said it has employed all its levers, including driving up revenue and controlling expenses. Besides an improvement in bottom line, the company reduced the number of debtor days outstanding by 12 days in the last two quarters, reducing costs on travel, communications, rationalising infrastructure and optimising resources.