Overall growth drives TCS Q3 revenues

MUMBAI, INDIA: Amid the growing business uncertainty and macro economic concerns, Tata Consultancy Services (TCS) Ltd, India’s leading IT and outsourcing giant delivered a strong  performance during the third quarter that ended on December 31, 2011.

In the third quarter, TCS revenues rose 13.5 per cent quarterly to reach Rs. 13,204 crore and net profit increased by 21.8 per cent quarterly to touch Rs. 2,803 crore.

“Our customer-centric approach in the market and execution rigor on the ground enabled us to post a strong financial performance in this quarter. Growth has been broad-based with all markets and all industries contributing substantially,” N. Chandrasekaran, TCS CEO & MD said on Tuesday.

In terms of broad-based growth across markets and industries during the third quarter, quite surprisingly, TCS reported positive double-digit numbers in Europe and US regions.

“All our markets have witnessed growth, whether it is US, UK, Europe, India, Asia-Pacific or Latin America. All our markets have grown sequentially. We have grown across all verticals, be it banking, retail or manufacturing,” Chandrasekaran said.

He added that the company performed strongly across all industry verticals, except for telecom, with double digits sequentially. More so, Chandrasekaran pointed out that company’s new service lines like enterprise solutions, assurance and infrastructure services, global consulting saw a good uptake and are growing fast at a double-digit rate.

With 18.1 per cent sequential growth, Europe market topped, followed by the US and UK markets with 13.3 and 9.5 per cent, respectively. Besides that, Latin America showed 18.6 per cent growth followed by India’s growth of 14.8 per cent and 15.7 per cent growth from Asia-Pacific region.

During the third quarter, TCS added 40 new clients and the number of $100 million-clients increased to 14. The company’s operating profits went up 22.6 per cent quarterly at Rs. 3854 crore and its operating margins improved by 2.18 percentage points at 29.2 per cent.

“We continue to focus on managing our operations optimally in the face of increased external volatility. We have increased our operating margins significantly by taking the benefits of growth, exchange movements and by keeping a strong focus on cost management,” said, S. Mahalingam, chief financial officer, TCS.

He added that the level of currency and market volatility had only risen in the past three months and they were adapting their strategies.

According to market analysts, TCS has delivered good strong performance in third quarter despite the overall uncertain business scenario globally.

“TCS has once again performed extremely well with 36.6 per cent yearly growth in revenues in Indian rupee term and 29.2 per cent EBIT margin. There has been an increase in revenue across all reporting segments, which is a very good indicator for the IT industry,” Kishan Bhat, engagement manager, Zinnov Management Consulting, said.

He added that majority of the services lines, which contribute to around 80 per cent of the overall revenues, have demonstrated more than 30 per cent growth year-on-year. Two new $100 million-clients have been added in the last quarter and this gives them hope that there is a silver lining and hence, respite amidst growing uncertainties in the global economy.

While, Partha Iyengar, Gartner’s vice-president, distinguished analyst and regional research director, said that the HCL and TCS results reinforce the message that the overall health of the global sourcing industry is strong.

“Individual company performance will be driven more by management vision and ability to drive an aggressive stance in the market. 2012 will see a widening gap between companies with a ‘can do' and 'cannot do' style of management in the offshore space and will likely see a new order emerge,” Iyengar observed.