TCS Q3 profit at Rs 5134 cr beats estimates but margins contract

Tata Consultancy Services, India'slargest software services exporter, reported a 13 percent quarter on quarter rise in profit after tax atRs 5314 crore on good forex gains during the third quarter of the current fiscal year.

According to CNBC-TV18 poll, profit after tax was expected to grow 10.2 percent sequentially to Rs 5,179 crore during the October-December quarter.

"TCS has performed very well on the bottomline, but disappointed on the margins front," said Ankita Somani,IT analyst at Angel Broking.

In dollar terms, the revenue has gone up by around 3 percent to $3348 million while the revenue in rupee terms has increased1.5% at Rs 21,294 crore quarter on quarter.

Analysts had expected the company to report earnings better than its peers as it has been delivering quarter-after-quarter top of the class financial results.

The third quarter is seasonally weak due to furloughs, fewer working days and employees going on vacation.Earlier in December, the management had said in analyst meet that there are no aberrations on a year-on-year basis, suggesting a typical seasonally weak quarter.

Earnings before interest and tax (EBIT) of TCS came in at Rs 6,335 crore 6,380 crore. Even operating margins declined marginally to 29.7 percent from 30.17 percent during the same period last year due to rupee appreciation and lower utilisation (due to holiday season). Meanwhile, rival Infosys has seen dollar revenue growth of 1.65 percent and EBIT margin growth of 150 bps to 25.02 percent.

 TCS Q3 profit at Rs 5134 cr beats estimates but margins contract

Tata Consultancy Services CEO N Chandrasekaran. Reuters

The company reported a volume growth of 1.8 percent while realisations were up 74 basis points.

"Strong international demand for our services and discipline in execution has helped TCS maintain its momentum and post robust growth in volumes as well as realisations, " said TCS CEO and MD N Chandrasekaran.

TCS believes 2014 will be a stronger year than 2013 as customers execute business plans in arelativelystable environment.

The company management said reinvestment in sales resulted in a contraction in margins.

Below are the highlights:

• The company added four $20 million plus clients during the quarter.

•Hiring target for FY14 increased further to 55,000 from 50,000

•Co's staff utisation came in at an all-time high of 84.3 percent ( excluding trainees)

•Gross staff addition came in at 14663

•Company added two $50 million plus clients during the quarter

•Co's international business grew 3.8 percent in dollar terms.All #markets except #India have seen growth

•Co announced a dividend per share of Rs 4 with an earnings per share of Rs 27.20

• Co signed eight large deals during the quarter

•Domestic market will be uncertain till the June quarter considering the election time. Company not expecting anything major in India in the next couple of quarters

•Discretionary spend taking place in the digital space.

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Updated Date: Dec 21, 2014 01:52:55 IST