TCS' arm CMC adds 21 clients in Q3; tax rate down to 29.2%

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TCS' arm CMC adds 21 clients in Q3; tax rate down to 29.2%

Tata Consultancy Services' subsidiary CMC announced its third quarter results. R Ramanan, the managing director and CEO of CMC tells CNBC-TV18 that they have had 21 client additions.

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Tata Consultancy Services ' subsidiary CMC announced its third quarter results. The company's Q3 consolidated net profit was down at Rs 41.37 crore versus Rs 45.37 crore, year-on-year, YoY.

Its consolidated net sales were up at Rs 396 crore, up 11% on a quarter-on-quarter (QoQ) basis.

The Q3 numbers are better than analysts' expectations. R Ramanan, the managing director and CEO of CMC tells CNBC-TV18 that they have had 21 client additions. They have also managed to bring down their tax. "Our average effective tax rate is at 29.2%," says Ramanan.

Below is an edited transcript. Watch the accompanying video for more.

Q: PAT and revenue both have come in much better than what we were expecting. Last time you had paid a higher tax, which hit your PAT numbers for the last quarter. You also factored in the wage hike, which hit margins to an extent. This quarter give us an idea about how PAT has seen a growth? What are the tax figures that you have reported?

A: We have had a good performance in this quarter. Our revenue has grown by about 11% QoQ and our EBITDA has grown by 14% and our PAT has grown by 27% to Rs 41.37 crore, which has been driven through strategies that we have been highlighting about CMC 3.0 where we have been focusing on growth in the international segment as well as in emerging economies.

We have been able to add 21 clients during this quarter. We have also added about 1,474 employees during the quarter and our EBITDA has grown primarily because our solutions and services mix in this increased revenue has still remained at about 88.9%. So we have been focusing on value adding solutions and services based growth.

Our growth momentum has been quite good in all the geographies in India as well as the international market. We have also followed it up with very strong focus on people productivity. Our productivity has also improved.

Q: America has grown by around 55% for the quarter. Give us an idea about Europe and your domestic business as well?

A: About 90% of our international revenue comes from the America's and only about 10% comes from the other geographies. We have had very good wins in Europe as well as in Middle East during this quarter. Out of the 21 customers we have been able to add 4 new customers in the Middle East and Europe and another four in the United States.

Q: Your system integration business is about 55% of your revenues. Can you give us a sense of how many clients you have added in the SI business? Last quarter you mentioned that in the ITES business you are expecting to see some ramp-ups and you may see some client additions for the quarter. Can you breakup the revenue growth on a sequential basis for both these key verticals?

A: All our SBOs - the CS, SI, ITES, E&T each one of these SBOs - the 3 SBOs which are SI, CS and ITES have grown by more than 10-14% QoQ and especially in the services space. Our E&T business has been flat during this quarter but that is normal during Q3 of the year when you do have a drop in terms of registrations etc because of the holidays and other factors.

Q: In the last quarter the tax was quite high at around 38%, has it gone down because analysts were expecting it to come down to around 28% or so?

A: Yes, we have been able to bring down our tax. Our average effective tax rate is at 29.2%. We are expecting, as we leverage the facilities that we have now built that this will come down further during the course of this quarter and the year.