TCS Outperforms; Margins Expand Despite Wage Raise

TCS announced its Q1FY14 results post market hours on July 18, 2013. The company beat market expectations and resulted in the stock prices hitting a 52-week high of Rs 1755 per share.

Revenues of the IT major grew by 4.11% sequentially to reach USD 3.165 billion in Q1FY14. In rupee terms, the sequential growth was 9.48% with revenues reaching Rs 17987.1 crore.

With respect to geographies, North America showed signs of recovery as revenues from the region grew by 11.5%. Since, 54.1% of the total revenues come from North America, the overall performance of TCS saw significant strength. UK and Continental Europe too showed strength, having grown by 11% and 14% respectively. Among the verticals TCS operates in, Telecom, Retail & Distribution and Life Sciences showed above average growth as revenues from these increased by 13.1%, 14.9% and 17.8% respectively.

The constant currency growth for TCS in Q1FY14 stood at 4.8%. The company saw growth in volumes to the tune of 6.1% in the quarter under review.

On the margin front, the operating margin saw sequential growth of 6.2% reaching USD 856 million. This translates in an expansion in operating profit margin of 54 basis points to 27.05%. The company saw margin expansion even after it underwent a raise in wages, making the performance all the more commendable. The net profit of TCS grew by 0.75% to USD 668 million.

In Q1FY14, TCS closed 10 large deals and added 2 clients in the USD 100 million + bracket. The company’s order pipeline seems strong and the outlook positive. The management too seemed confident about the outperformance of TCS as compared to the industry.