TCS keeps up the faith; Q1 net up 35 per cent

19 July 2006

TCS, Asia''s largest IT services company, has announced first quarter results which are modestly above analyst expectations. The company managed strong volume growth during the quarter and is very positive about sustaining it in the coming quarters, though margins are under pressure.

For the quarter ended 30th June, 2006, TCS has reported a consolidated net profit of Rs882.66 crore, an increase of 35 per cent over Rs653.85 crore reported for the same quarter of the previous year. On a quarter-on-quarter basis, net profits have increased 6.06 per cent from Rs832.12 crore for the quarter ended March 2006.

Consolidated revenues have increased 46.27 per cent for the quarter to Rs4,227.19 crore, from Rs2,890.01 crore for the previous year quarter. On a sequential basis, revenues have gone up 13.96 per cent from Rs3,709.12 crore for the March 2006 quarter.

Operating profits for the quarter increased 30.97 per cent from the previous year quarter and 7.88 per cent from the March 2006 quarter. Operating margins as a percentage of total revenues declined considerably to 25.02 per cent during the quarter, as compared to 28.28 per cent for the previous year''s quarter, and 26.75 per cent for Q4 2005-06.

The decline in operating margins was mostly on account of rising employee costs. Salary costs increased 142 per cent over the previous year quarter and 22.63 per cent sequentially. Total operating expenses increased 52 per cent year-on-year, and 16.19 per cent sequentially.

In line with the general industry trend, TCS has also seen revenues from the Americas decline to 53.2 per cent of total revenues from 57.9 per cent for the previous year quarter. Revenues from Europe, including UK, increased to 27.7 per cent from 22.1 per cent. Domestic revenues declined to 10.6 per cent from 13.3 per cent.