TCS: Growth Is On The Upswing

India's largest IT Company, Tata Consultancy Services (TCS) declared its Q3FY14 results yesterday. The numbers are looking good in rupee terms. However, it has disappointed in dollar terms at least on the topline. The depreciation of the rupee over the last one year has definitely benefited not just TCS, but all IT companies across India who have been posting a good set of numbers in rupee terms. However, leading IT companies across India are so far doing considerably well in dollar terms too due to signs of revival in the North American and the European markets.

For the December quarter, TCS's revenue in rupee terms stands at Rs 21294 crore against Rs 16070 crore in Q3FY13, up 32.5 per cent on a yearly basis. However, the revenue grew by just 1.5 per cent sequentially. The revenue in dollar terms for Q3FY14 stood at USD 3438 million, against USD 2948 million in Q3FY13, which is up 16.62 per cent growth on a yearly basis. Revenue in dollar terms for the December quarter grew by just 3 per cent on a sequentially basis. The impact that the depreciation of the rupee can be clearly seen from the yearly growth in revenues in rupee terms compared to the growth in revenues that the company has posed in dollar term. Sequentially though, the revenue growth is almost comparable in rupee as well as the dollar terms thanks to the stability of the rupee during this period.

The operating income of the company in rupee terms stood at Rs 6337 crore, up 44.6 per cent on a yearly basis and just 0.5 per cent sequentially. Operating profit in dollar terms stood at USD 1023 million showing a 27.3 per cent yearly growth and a 1.6 per cent sequential growth. Its net profit stood at Rs 5333 crore during the December quarter, showing a 50.3 per cent yearly growth and a 15.1 per cent sequential growth. In dollar terms, the net profit showed a 31.7 per cent yearly growth and a 14.7 per cent sequential growth for the quarter. The net profit grew well on a sequential basis as well, due to the considerable other income that it earned during Q3FY14 against what it did in Q3FY13.

"Strong international demand for our services and a discipline in execution has helped TCS maintain its momentum and post robust growth in volumes as well as realisations. Our diversified market presence and services portfolio have helped us overcome seasonal weakness and soft demand in the Indian market." said Chief Executive Officer and Managing Director, N Chandrasekaran, while commenting on the Q3 performance.

We also expect the company to show an average performance in the coming quarters. However, actual business growth will be the real driver of growth for the companies in the IT industry as there is a risk of rupee appreciating in the approaching future. The management of TCS is looking confident about the industry prospects as the company has increased its hiring target for FY14 to 55000, up by 5000.