TCS Revenues Rise By 3.3% Even In A Weak Quarter

    TCS announced its Q3FY13 result after market hours yesterday. Financials indicate that it has indeed been a healthy quarter for the company. Although markets had been expecting a modest growth in volumes and revenues, companies so far have posted better than expected numbers. This has been the case despite December being a seasonally weak quarter. 

     TCS announced a 3.33% sequential rise in its revenues to USD 2.948 billion. At the same time, it saw an improvement in the operating margins which rose by 51 basis points to 27.3%. Net profit too, increased despite a forex loss of Rs 160 crore. The profit after tax for Q3FY13 was seen higher by 1.40% at USD 0.652 billion. The volume growth however, that TCS achieved was 1.25% thus hinting towards no pricing pressures.

     The growth in the revenues of TCS has been termed as broad-based. Geographically, all areas have seen growth except for Continental Europe. Similarly, on the verticals front, telecom turned out to be the soft-spot. Revenue growth can be seen surpassing in:

• Latin America, UK and India in terms of geography,
• Energy & Utilities, Manufacturing and BFSI in terms of verticals and
• Global Consulting, Asset Leverage Solutions and Infrastructure Services in terms of service offerings

Employee metrics saw additional strength as well. Gross additions were 17145, taking the total headcount to 263637. Utilisation rates remained flat as compared to the previous quarter at 81.7% (excluding trainees). Attrition levels saw some easing as they went below the 10% mark, closing at 9.80% for the quarter.

Overall, the results have been better than expectations and have been indicative of financial growth and improvement despite modesty in volume growth. The management has given a positive outlook for Q4FY13 and for FY14 thus brightening the outlook for the industry.

Exclusive From The Earnings Conference Call

Volume growth was soft during this quarter because of longer than expected furloughs. However, despite this trend being in a large extent in the BFSI space, the vertical has managed to do well. The vertical has been going through a lot of changes and technology will continue to play an important role. Growth has been across geographies, verticals and services. Overall, this has been a well balanced quarter for TCS.

TCS has a solid order book and a strong order pipeline. The pipeline is well distributed across industries and markets. Moreover, discretionary spending is picking up and at the same time the management has not been seeing any delays. There have been no cautionary statements being made from any of its clients and thus the management is positive about the outlook for Q4FY13 and for FY14.