TCS results a nose ahead of Infy

MUMBAI: Asia’s largest software services provider, Tata Consultancy Services (TCS), on Thursday reported robust results for the third quarter ended December 31, 2005, even as revenues for the first nine months crossed $2 billion.

This is the second consecutive quarter of impressive growth that TCS has reported, helped by acquisitions abroad.

The Mumbai-based software services provider said that revenues on a sequential quarter basis grew 11.08% to Rs 3,288 crore (as per Indian Gaap) even as profit after tax went up 8.56% to Rs 753 crore (8.69% as per US Gaap).

Against the corresponding quarter of last year, TCS reported revenue growth of 29% and a subdued net profit growth of 5.58%.

Bangalore-based Infosys Technologies had, in contrast, reported sequential growth of 10.5% in revenues and 8.45% in net profit on Wednesday.

Revenue growth was volume driven with the company aggressively looking at client acquisitions, 83 in
the quarter, while billing rates remained flat.

This means that though the company acquired more clients than any other quarter this year, it has not been able to get better pricing from existing clients who contribute close to 95% of revenues.

TCS’ revenue and profit growth on a sequential quarter basis though is impressive, considering the fact that the December-ended quarter is a slow one for business for most services companies because the month has fewer working days.

TCS has been able to remain largely unaffected because a majority (52%) of its projects are based on fixed-rates, and not time and material projects, as is the case with others.

One of the big wins that the company reported in the quarter was a $40 million multi-year deal with a consumer goods major in the US.

“Solid volume growth on the back of key customer wins we had during the earlier quarters, as well as significant domain-led engagements in verticals like BFSI (banking and financial services), retail and utilities continued to fuel TCS’ progress in Q3,” S Ramadorai, CEO & managing director of TCS, said.

“TCS has emerged as a full services player in the industry and laid a strong foundation for future growth through key strategic moves in transaction-based BPO and the banking products space. We are already winning deals that validate our strategy and will help us accelerate growth,” he said.

During the quarter, the company acquired core banking solutions provider, FNS, in Australia and a BPO company, Comicrom, in Chile. 

Operating margins were flat at 27% largely because of the inability to drive up billing rates despite higher volumes even as onsite (work done at client locations abroad) work was 61.40% of the total. Onsite work is typically margin dilutive as compared to work done offshore.