Tata Consultancy Services (TCS), the India's largest software services exporter, surpassed street expectations on every parameter with the first quarter (April-June) net profit at Rs 5,057 crore, down 4.5 percent as against CNBC-TV18 poll estimates of 11 percent degrowth. Net profit in March quarter was Rs 5,296.7 crore.
The bottomeline was aided by exceptional gain of Rs 489.75 crore on account of change in depreciation policy with effect from April 1, 2014 and forex gain of Rs 239.7 crore for the quarter. Other income increased to Rs 787.15 crore from Rs 720.89 crore during the same period.
"Robust volumes and healthy growth across all industries and key markets helped TCS start the new financial year on a strong note as broad-based business portfolio continues to deliver results," said N Chandrasekaran, CEO and MD.
Revenue (in rupee terms) grew 2.6 percent sequentially to Rs 22,111 crore and dollar revenue shot up 5.5 percent (constant currency revenue growth at 4.8 percent) to USD 3,694 million in the quarter ended June 2014, which both were expected to show a growth of 2 percent and 4.91 percent, respectively. Its dollar revenue growth was quite strong compared to its closest peer Infosys reported at 2 percent.
During the quarter, TCS posted the highest incremental revenue of USD 191 million in the last 15 quarters driven by holistic growth across markets led by North America, Asia-Pacific, India, UK, Europe. "Growth was seen across all industry segments led by media & information services, life sciences, retail, telecom with all non-BFS verticals growing in excess of 5 perent sequentially," said the company in its filing.
The software services provider reported volume growth of 5.7 percent in the quarter gone by while its peer Infosys' volume growth was 2.9 percent.
Operating profit margin was at 26.3 percent, down 285 basis points compared to 29.15 percent in March quarter and better than analysts' forecast of 25.7 percent. The rupee movement impacted profit margins by 73 bps in Q1.
Analysts had expected margin degrowth of 345 basis points due to currency appreciation and wage hike but Rajesh Gopinathan, CFO of the company said, "Disciplined stance in operations helped the company mitigate impact of multiple headwinds like currency movements, accelerated depreciation norms and wage hikes during the quarter."
The company added five new USD 50 million-plus clients in Q1. "We had 7 large deals during the quarter and currently at least 8 large deals are under discussion," said Chandrasekaran.
TCS won two multi-year, multi-million dollar deals from North American global pharmaceutical & medical device company and global semiconductor company, respectively. It also won multi-million euro deal from fashion apparel retailer in Europe.
Analysts see re-rating of the stock and raising of earnings per share forecast for FY15, given the strong utilisation rate during the quarter. Utilisation rate was all-time high at 85.3 percent (excluding trainees) for the quarter.
Attrition rate was 12 percent in last 12 months with the net additions of 4,967 employees in Q1. Total employee strength at the end of June quarter was 3,05,431 on a consolidated basis with the company is on track to hire 55,000 people in FY15.
"We have already started on-boarding the campus trainees this year with 2,500 joining in June," said Ajoy Mukherjee, executive vice president and global head, Human Resources.
Chandrasekaran said on the occasion of 10th anniversary of TCS' IPO, the board of directors has announced a special dividend of Rs 40 per share.
On the innovation and intellectual property front, the company has applied for 1,804 patents including 58 during the quarter. Till date, it has been granted 129 patents.
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