Tata Consultancy Services 1st Quarter, 2011-12 results analysis

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TCSs 1st Quarter, 2011-12 results analysis
India's largest IT software exporter, Tata Consultancy Services (TCS) announced its results for the quarter ended 30 June, 2011-12 on Thursday. The company's net profit increased by 26.68 percent to Rs 2,147.76 crore in Q1, 2011-12, as compared to Rs 1,906.07 crore in the same quarter of last year.

The net profit increase was mainly on the back of a significant increase in sale revenues following increased spending by its major clients and huge gains from its other income. The company was still able to maintain a healthy margin despite a substantial increase in its costs during the period.

The company's sales revenue increased by 31.39 percent to 10,797.02 crore in Q1, 2011-12, compared to Rs 8,217.28 crore in the same quarter last year. The company reported an increase in profits across all its segments in the quarter. Its Banking and Financial Services Industry segment (BFSI), which accounts for majority of the company's revenue grew by 27 .38 percent to Rs 4,676.88 crore in Q1,2011-12, compared to Rs 3,671.54 crore in the year ago period.

The retail and consumer segment reported a 39.73 percent increase to Rs 1,256.88 crore in Q1, 2011-12, compared to Rs 8 99.48 crore in the year ago period. Its manufacturing segment recorded a 33.80 percent growth to Rs 818.45 crore in Q1, 2011-12, compared with Rs 611.69 crore in the year ago period. Its telecom segment grew by 25.05 percent to Rs 1,498.62 crore in Q1, 2011-12, compared with Rs 1,198.34 crore in the year ago period. The company added 24 new clients during the period.

The company's total costs increased by 33.55 percent to 7,972.10 crore in Q1, 2011-12, compared to Rs 5,969.31 crore in the year ago period. The major reason for the increase in expenditure was the surge in employee costs, which increased by 38.38 percent to Rs 4,205.71 crore in Q1, 2011-12, compared with Rs 3,039.05 crore in the year ago period.

However, a sign of worry is the marginal drop in the company's operating margin, which declined to 26.16 percent in the reported quarter from 27.35 percent in the Q1, 2010-11.

The company's other income increased by 208.12 percent to Rs 294.14 crore in Q1, 2011-12, compared with Rs 95.46 crore in the year ago period. This was mainly on account of a forex gain of Rs 79.56 crore in Q1, 2011-12, compared with a loss of Rs 47.2 crore in the last quarter.

Increase in interest and taxes also impacted its margins. Interest costs increased by 76.11 percent to Rs 4.72 crore in Q1, 2011-12, compared with Rs 2.68 crore in the year ago period. Taxes also increased by 67.29 percent to Rs 673.85 crore in Q1, 2011-12, compared with Rs 402.80 crore in the same quarter last year.

However, the increase in income outweighed the increase in costs and expenses, with the company posting an EPS of Rs 12.32 in Q1, 2011-12, compared with Rs 9.71 in Q1.2010-11.The Company's percentage of public shareholding as on 30 June, 2011 stood at 25.93 percent.

Story first published: Saturday, July 16, 2011, 9:30 [IST]
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