Tata Consultancy Services, India’s largest IT outsourcing company, said its second quarter net profit was up 44 per cent year-on-year helped by strong demand from all its markets, particularly Europe.
TCS said it was also able to boost its margins – a key performance indicator for India’s technology companies – as the number of its customers with more than $50m in annual revenues rose 50 per cent to 15.
“There is tremendous scope to continue to increase the ‘wallet share’ with our top 50 customers,” said S Ramadorai, chief executive of TCS.
The results for the three months ended September added to a strong quarter for India’s IT companies as buoyant economic growth in developed markets combined with increasing demand from existing customers to lift their top lines.
TCS was under margin pressure in the first quarter of its fiscal year ending June because of pay rises and visa expenses but this quarter it was able to increase margins by 294 basis points.
“We have been very selective in the work that we do, [selecting] work that will help margins,” said S
Mahalingam, chief financial officer.
TCS said net profit rose 44 per cent to $216m during the quarter, while revenue was up 42 per cent at $975m year-on-year.
The company said it was on track to achieve its aim of hitting $10bn in revenue by 2010. It would need to grow 6.5 per cent quarter-on-quarter over the next 15 quarters to achieve the target, said Phiroz Vandrevala, head of global corporate affairs. “It’s not an Everest-type aspiration,” he said.
The company increased the number of its customers spending $1m or more to 274 from 258. It added 8,919 new hires during the second quarter to bring its total workforce up to 78,028.
The results, which beat a Reuters poll of analysts forecasting net profit would rise 39 per cent, follow a better-than-expected second quarter performance from Infosys Technologies, the industry number two.
Infosys reported a 53 per cent rise in net profit during the quarter, helped also by rising spending from its larger customers.
Citigroup said concerns about Indian companies’ rising cost-bases were being overdone, with the groups overcoming employee shortages and a lack of suitable candidates through in-
house training and other measures.
“India . . . remains well ahead on cost competitiveness,” the bank said in a research report.
Of the company’s revenues, Europe accounted for Rs10bn ($220m) during the second quarter, up from Rs5.73bn a year earlier. Sales in the US, meanwhile, were Rs21.98bn compared with Rs15.4bn a year before.
TCS shares closed up 2.3 per cent at Rs1,130.45 on the Bombay Stock Exchange. The stock has risen 58 per cent over the past year.