TCS declares Q1 result profit at 34% y-o-y. Affirmative that demand will grow

Stocks

oi-Shoaib MD

By Shoaib Md

Published: Friday, July 15, 2011, 12:49 [IST]

TCS posted a 32.51% year-on-year rise in net profit to Rs 2062.43 crore and revenue rose 34.36% to Rs 8613.56 crore based on the data available on the Bombay Stock Exchange.

This was a relief for India's $60-billion outsourcing sector looking that was looking for positive cues amid growing economic uncertainties in US and Europe.

The 34.36% growth by TCS in first quarter to revenues to Rs 8613.56 crore provided some relief to investors. Big ticket customers such as General Electric (GE) and Citigroup (Citi) in their bid to increase their profitability seek to cut costs and outsourcing non-core back office along with software development projects to vendors like TCS.

Announcing the quarterly results, the country's second biggest software company Infosys had raised concerns on demand going forward for outsourcing because of economic uncertainties. Meanwhile TCS has denied any such trend.

"While we are watchful, as of now we continue to see sustained demand for our services," TCS CEO and MD N Chandrasekaran said on Thursday.

The analysts' fraternity have said that though TCS also got affected because of wage hikes, but it is the management commentary about strong demand that is opposite to Infosys projection is a relief.

"The company during second quarter is expected to hire 17,000 to 20,000 people," said Chandresekaran.

The company plans to hire about 60,000 people during FY 2011-12. For Q1 FY12 the company hired an addition of 11,988 employees, while 8,412 left TCS. Therefore, the net remaining with the organization stood at 3,576 headcounts, taking total headcount to 2,02,190.

The most important aspect of this growth was it being broad based, which lends a degree of stability to this growth, stated an analyst. Even though the management is cautious about the macro scene but they are confident about client spending.

Chandrasekaran did not deny the economic uncertainty, but said, so far, it has not affected demand for outsourcing yet. He said , "This uncertainty will continue. Unemployment is an issue in some countries; there is unrest in the Middle East; there was a natural calamity in Japan. These things put pressure on the environment".

Commenting on the TCS' quarterly result Microsec Research, a leading research and investment banking company, said:"The results remained encouraging with both top line and bottom line coming above our expectations. The most notable part of the results is a 7.5% growth in volumes, that too on such a large base. We continue with our BUY rating on the stock with a target price of INR 1,388.70 per share."

Your feedback is valuable to us. Mail at [email protected]