Tata Consultancy Services (TCS), India’s largest software exporter, has posted better-than-expected numbers for the September quarter.
TCS’s consolidated revenues increased 3.1% over the June quarter to Rs 7,435.23 crore, as compared with a 2.1% sequential increase in consolidated revenues reported by Infosys Technologies to Rs 5,585 crore.
Growth in TCS’ revenues was helped by a 6.6% increase in the banking, financial services and insurance (BFSI) segment, which forms 45% of the total revenues. Share of revenues from the BFSI segment increased sequentially for both Infosys and TCS; share of revenues from the telecom and manufacturing segment dropped for both.
Operating profit margins of both TCS and Infosys improved in September with TCS’ margins increased by a wider margin. TCS’ margins increased 122 basis points (100 basis points make one percentage point) from the June quarter to 28.48%, while Infosys’ margins increased 48 basis points to 34.61%. Growth in margins is commendable for both companies. Analysts expected Infosys’ margins to decline and TCS’ margins to be stable or decline.
At the net level, TCS performed well and posted a growth of 7% in its net profit to Rs 1,642.21 crore, while Infosys’ net profit increased 0.9% to Rs 1,540 crore. Analysts were expecting Infosys to post a sequential decline, while TCS was expected to post flat-to-small decline in its net profit. TCS added 30 new clients in the September quarter compared with 35 new clients added by Infosys.
The environment for IT companies shows signs of improvement.
The TCS stock gained 2.8% on Friday to Rs 599 per share on expectations of good numbers, though the results were announced only after market hours. The BSE Sensex ended the day 0.74% higher.
Last week, Infosys upgraded its earnings per share (EPS) guidance for the year ending March 2010. The company now anticipates its EPS to be in the range of Rs 99.60-100, as against the guidance of Rs 94.59-96 given out in July. Even as the guidance has improved, revised guidance still represents year-on-year decline of 4.8-4.4%.
Going forward, software companies will have to be active and very precise on their forex policies on account of massive inflows expected in India due to interest rate differential said an analyst. Analysts expect interest rates in India to become firm resulting in appreciation of the Indian currency. Analysts are positive on both the stocks.
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