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TCS disappoints with slower growth, no impact from Greece seen

chandrasekaran

Tata Consultancy Services seemed to be suffering from intense pricing competition, as it reported a sequential dollar revenue growth of just 3.5% compared to the 4% that the Street was looking for.

“We’ve had a realization dip of 120 basis points. Realization has been flat compared to last year.. last two quarters had seen realization gains,” CEO N Chandrasekaran said. Realization refers to pricing.

In rupee terms, revenue growth was 6%.

Volume growth was 4.8%. Volume refers to the amount of work done (as distinct from the revenue that it generated.)

Chandrasekaran said the company was generating about $2 bln a year from ‘digital services’. “There are a lot of exclusions” to that number, he said, adding that it was difficult to separate digital services from other kind of services clearly.

TCS has a target of achieving $5 bln in digital revenue by around 2019.

Margins were higher than expected, despite wage hikes that dented margins by 190 basis points. The hit was cushioned by positive impact of rupee devaluation (70 basis points) and higher operating efficiency (30 bps).

Net Profit at K 5,684 crore up 53.1% O-o-O & 2.1% Y-o-Y.

Chandrasekaran said Japan and Latin America dragged down growth. Asked whether this (lower growth) was the new normal, CEO Chandrasekaran said he could not comment on it.

He also said he did not expect any substantial impact from the turmoil in the Eurozone around Greek debt.

The first quarter is considered to be the strongest quarter for IT companies. Not surprisingly, year on year, growth was over 16%.

North America rebounded with a sequential growth of 4.4% (net of currency movements.)

The CEO said he was not overly concerned about US government investigations into discrimination allegations against the company. “TCS has got very strong processes and we’re very vigorous on implementing our processes,” Chandrasekaran said.

The company saw an increase in attrition, largely due to the fact that people generally leave after getting their salary increases.

“The demand is pretty strong,” CEO N Chandrasekaran said.

The company said attrition increased during the quarter to 15.9% LTM from 14.9%.

The total employee strength at the end of Q1 was 324,935 on a consolidated basis with gross addition of 20,302 associates (net addition: 5,279 employees).

The utilization rate (excluding trainees) was at an high of 86.3% and that including trainees was 82.9%. The attrition rate (LTM) was seasonally higher at 15.9% including BPS. The percentage of women in TCS rose to an all-time high of 33.5% while the number of nationalities increased to 124.

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