TCS Q2 net up 15%; says economic uncertainty remains

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TCS Q2 net up 15%; says economic uncertainty remains

Tata Consultancy Services reported a lower-than-expected 15% year-on-year rise in second quarter net profit at Rs 2,439 crore, amid continued uncertainty in global economy.

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Tata Consultancy Services reported a lower-than-expected 15% year-on-year rise in second quarter net profit at Rs 2,439 crore, amid continued uncertainty in global economy.

Revenue for July-September quarter rose 25% from a year ago to Rs 11,634 crore, India's top software services exporter said late Monday.

Analysts on average had expect TCS net profit at Rs 2,450 crore on revenue of Rs 11,750 crore, according to CNBC-TV18 poll.

TCS' operating margin in the second quarter was up 89 basis points at 27%.

The debt crisis in Europe and the unemployment and economic uncertainties in the US is a major worry for Indian software service providers as the two regions account for a major share of their revenues. It is widely expected that clients will cut discretionary spends.

"There are ambiguities in the external environment in the short-term," CEO and MD N Chandrasekaran said.

But the company doesn't see clients cutting spends or cancelling projects.

The company said North America business grew 9%, Europe grew over 9% and UK grew by over 10%, in the second quarter. The APAC (Asia-Pacific) region saw a 10% growth, Middle East and Africa region grew 9% and Latin American region saw a 3% growth. Revenues from India, were however, down 4%, it said.

TCS added 35 new clients in the second quarter.

"We continue to make the necessary investments to support our future business growth in different markets as we remain in expansion mode. However, we are also working to optimize our cost structure and keeping a close watch on economic signals," said CFO S Mahalingam.

TCS' rival Infosys had last week reported a consolidated net profit of Rs 1,906 crore, up 10% year-on-year, slightly ahead of street expectations. Infosys revenue was up 17% at Rs 8,099 crore.

Infosys' CEO and MD S Shibulal had also warned that the global macroeconomic environment was uncertain and it is a concern for the IT industry.

The Indian rupee has depreciated sharply to the US dollar in recent months, boosting earnings. However, Mahalingam of TCS warned that the recent "unprecedented volatility in the foreign currency markets is fresh cause for concern."

Meanwhile, TCS net added 12,580 employees in July-September and had 214,770 employees as of September 30.

The company said attrition rate dropped to 13.7% in July-September from 14.8% in April-June. Attrition in IT services business was at 12.51%, while BPO (business process outsourcing) attrition was at 24.25%, it said.

"We are on course to meet our hiring target for the current financial year. Our employee engagement efforts are helping to curtail attrition and increase retention of talent in the company," said Ajoy Mukherjee, executive vice president and global head, human resources.

TCS shares closed down 1.2% at Rs 1,120.25 on NSE before the results announcement.

Nachiket Kelkar
nachiket.kelkar@network18online.com