Half of TCS’s income was generated from N American clients, while businesses in Europe contributed one-fourth of the total turnover accruing from there.
MUMBAI: Tata Consultancy Services, the country’s largest software services company, pierced the US $4 billion watermark when it registered revenues of $4.3 billion (Rs 18,685 crore) during the financial year 2006-07, up 41% from the year before. Net profits were up 42% for the year.
Almost half of TCS’s income was generated from North American clients, while its businesses in Europe have started firing on all cylinders, contributing one-fourth of the total turnover accruing from there.
Commenting on the performance, S Ramadorai, CEO and managing director, said: “TCS’s robust business model, using our full-services play and global network delivery model, has given us the pole position to capitalise from the strong demand environment that exists globally.”
Sales for the quarter under review touched Rs 5,162 crore (up 6% sequentially), beating median estimates of Rs 5,150 crore from a Bloomberg survey of 11 analysts. Net profits rose to Rs 1,195 crore for the fourth quarter, up by 7% sequentially for the three months ended March 31. The profit figure, however, missed the Rs 1,210 crore median estimate of 11 analysts.
Given the acute competition for the No 1 position between TCS and its Bangalore rival Infosys, observers said that TCS seemed to be keener to grow the topline and Infy its bottomline. In the January-March quarter, while Infy’s sales were 73% of TCS’s, its net profits were as high as 96%. Put another way, Infy makes nearly as much money on three-quarters of TCS’s sales.
This is one reason why TCS is now focusing on higher paying customers. “Our emerging hi-growth services are giving the company a superior quality of revenue and a diversified customer base across markets and verticals. The significant number of large wins in FY07 that will ramp up during the next fiscal year makes us confident of continuing sustained, profitable growth,” Ramadorai added.
TCS has hired more recent graduates and customised and managed computer networks for more US and European clients from India to curb expenses and boost profitability. The company reported a gross addition of 32,462 (net 22,750) employees during 2006-07. In the fourth quarter, the gross addition was 8,613 (net: 5,827).
TCS declared that it maintained the lowest attrition rate in the industry at 11.3%. At the end of Q4 2006-07, the total employee strength of the company was 89,419 professionals. Overseas nationals formed 9.6% (8.8% in Q3) of the total employee base, with employees coming from 67 different nationalities. 26% of all employees are women.
In line with its peers, N Chandrasekaran, TCS's global head of sales and operations, said: "The pricing environment is very encouraging." The deal pipeline is flush with orders. Commenting on the demand scenario, he added: "Last year's large wins are ramping up as planned. The TCS operations engine continues to deliver certainty to customers".
"Our full-services play continues to score at an impressive run-rate and this is translating into a very healthy pipeline leading to growth across services and domains, in mature and emerging markets," Chandrasekaran added.
Shares of TCS gained 1.40%, or Rs 17.45, to Rs 1,280.10 on the BSE on Monday. —With Bloomberg reports
1-minute Q&A
TCS CEO S Ramadorai
On impact of rupee appreciation
During the quarter, the rupee’s appreciation had a negative impact to the tune of 57 basis points to our operating margins. Our strategy is to protect our net position of dollar receivables and we have $1 billion on cover at Rs 43.50-44.0.
On bringing other Tata IT firms under TCS
There are no such plans.
On TCS’ proposed overseas float
No update!
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