[T.S.R:16080] TCS Reports PAT Growth of 35%, Lends Wings To The Ongoing Rally

Tata Consultancy Services, India's largest outsourcer, said Thursday that quarterly profit rose a better-than-expected 35 percent in dollar terms as strong global demand drove record hiring. Net profit for the July-September quarter was 21.1 billion rupees ($454.7 million), under U.S. accounting standards. Revenues were 92.8 billion rupees ($2.0 billion), up 30 percent from $1.5 billion during the same period last year. Strong demand for TCS's low-cost business services outweighed the negative impact of the rupee's 4 percent rise against the dollar during the period, as well as the mounting costs of a war for talent in India's outsourcing sector, which has driven wages and attrition up. More than half of TCS's business comes from North America. "Despite increasing employee costs, they were able to improve margins because growth rates have been significantly better," said Dipen Shah, an analyst at Mumbai's Kotak Securities. Volumes grew 11.2 percent, which Shah said was "significant" off a high base. "The increase in hiring target indicates that the macro scene may be uncertain, but the demand environment is strong," Shah said. The company added 19,293 employees during the quarter - a net of 10,717 people - its highest ever and raised its gross hiring target for the year ending March to 50,000. Attrition rose one percentage point from the prior quarter, to 14.1 percent. "We are not happy with that," chief executive N. Chandrasekaran said. "There is tremendous focus across the management chain to bring down attrition." TCS offered promotions and bonuses this quarter that shaved 1.6 percentage points off margins, which the company more than made up for with foreign exchange gains and productivity and cost efficiency improvements. The biggest concern now is the uncertain global economy, executives and analysts said. "Given the growth we have achieved across all industry units, we are very positive about the global demand recovery going forward while being watchful in view of the macro environment," Chandrasekaran said. Safe Harbor Statement: Some forward looking statements on projections, estimates, expectations & outlook are included to enable a better comprehension of the Company prospects. Actual results may, however, differ materially from those stated on account of factors such as changes in government regulations, tax regimes, economic developments within India and the countries within which the Company conducts its business, exchange rate and interest rate movements, impact of competing products and their pricing, product demand and supply constraints.   Nothing in this article is, or should be construed as, investment advice.

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