TCS may join Rs100,000-revenue club in 2015; $4 bn net profit likely

Tata Consultancy Services (TCS), India's biggest software services exporter, is set to become a $4-billion net profit company in the current financial year.

TCS is also set to join the ranks of the coveted group of companies with revenues of Rs 100,000-crore or more in the financial year ending 31 March 2015.

The company had reported revenue of Rs81,809 crore and net profit of Rs19,164 crore for the year ended March 2014.

The projection is based on of TCS's strong performance in the first quarter of fiscal 2015. The company's revenue grew by 22.93 per cent and net profit rose by 32.25 per cent during the quarter ended June 2014 (See: TCS Q1 net vaults nearly 27% to Rs5,058 crore).

Assuming that the company maintains the revenue trend and the net profit it registered in the first quarter for the remaining three quarters, the company's profit would be $4 billion on revenues of Rs100,000 crore for the financial year ending March 2015.

In the first quarter, the company reported a consolidated net profit of Rs5,078 crore (adjusted for exceptional profit of Rs490 crore), up 32 per cent. A 30-per cent year-on-year growth for the remaining three quarters would take the company's net profit to around Rs25,000 crore in FY2015.

At the current rupee-dollar conversion rate of 60.44, the profit could be over $4 billion. Analysts expect TCS's net profit to grow around Rs 21,500 crore for FY2015 and over Rs 24,500 crore for FY2016.

Moreover, TCS's strong Q1 show was on the back of 23 per cent growth in revenue.

Its "other" business showed a 28.4-per cent growth in revenue followed by telecom, media and entertainment (27.8 per cent) and manufacturing (24.8 per cent). The BFSI and retail segments posted below average growth.

The year-on-year operating margin has moved up marginally by 11 basis points to 28.55 per
cent, mainly due to cost-savings in terms of employee benefit expenses. However, the operating margin has been significantly down compared to the 30.59 per cent reported for the year ended March 2014.

The company has announced an interim dividend of Rs40 per share for the financial year 2014.

Tata Sons, which holds a 73.69 per cent stake in TCS, would get a tax-free dividend of Rs5,774 crore, followed by FIIs Rs1,296 crore and domestic institutional investors Rs399 crore.

The retail shareholders will be richer by 350 crore.

Operating margin (%)
Quarter ended
Jun-14
Mar-14
Jun-13
FY 2014
BFSI
30.08
34.14
30.41
32.8
Manufacturing
28.69
31.19
28.42
29.3
Retail and consumer
29.86
32.70
28.64
32.4
Telecom, media and entertainment
26.13
29.50
24.75
28.5
Others
26.32
24.37
26.50
26.7
Total
28.55
30.88
28.44
30.5