TCS Beats Rival Infosys, Pleases Investors

TCS announced their results on July 12, 2012. The financials of the firm were above analysts’ expectations and this has pleased the investing fraternity overall. Over the last two years, TCS has outperformed rival Infosys in seven out of eight quarters. In USD terms, TCS witnessed a topline growth of 3.33 per cent, which is healthy considering the current market conditions and the global demand for reduction and cuts in IT spending.

The revenues increased to USD 2.728 billion for Q1FY12-13 from USD 2.64 billion for Q4FY11-12. The net profit too saw a sequential increase of 2.896 per cent, increasing from 0.587 billion to 0.604 billion. The operating profit margin and net profit margin of the firm stood at a healthy 27.72 per cent and 22.17 per cent respectively.

In terms of rupee though, the topline of the firm witnessed a growth of 12.14 per cent on the back of a heavily depreciated rupee, reaching Rs 14,869 crore in Q1FY12-13 from Rs 13,259 crore in Q4FY11-12. The operating profit and net profit in rupee terms have been announced to be at Rs 4,077 crore and Rs 3,318 crore respectively.

On the segment front, all the segments grew sequentially other than the ones under the tab ‘others’, which declined by 15.2 per cent. The ones that remained stagnant were manufacturing, hi-tech, life sciences & healthcare, travel & hospitality, and media & entertainment. Since these were stagnant in rupee terms, they are bound to have declined in dollar terms, the performance being clearer on the amount of business derived overseas in each segment.

From the results we see that the company has maintained growth figures in line with their confidence of beating NASSCOM’s yearly guidance for FY12-13. Its financials are robust in tough conditions and the firm has clearly outperformed its peers. Looking at the current performance, revenue generation ability and execution, we expect the company to maintain growth over the coming quarters and years. It is therefore our recommendation to investors to accumulate the stock.