TCS shows excellent profit but stocks fail to react

Tata Consultancy Services Ltd. (TCS), the world"s second-largest computer services provider by market value, said that its fourth-quarter profit have increased after companies outsourced more information-technology contracts.

Natarajan Chandrasekaran, Chief Executive Officer said "The demand environment continues to be vibrant." He added, "There are opportunities across markets and industries."

Tata Consultancy joins International Business Machines (IBM) and Accenture in stating that companies have raised their spending on computer services along with advisory businesses.

Reports

According to a Jan. 10 report prepared by Cambridge, Massachusetts-based Forrester Research, world-wide spending on IT services by businesses and governments are expected to grow by 7.1 percent this year to $254 billion.

Forrester's Apr 1 dated report stated that U.S. businesses and government will lead the growth as their spending was an estimated $104 billion on IT outsourcing this year.

Its was estimated that TCS derived 53 percent of its revenue from companies in North America, 16.2 percent from the U.K., and 10.5 percent from continental Europe in the year ended March 2010.

A stronger rupee will dampen the value of overseas earnings.

Results

The company had revenues of Rs 7,969.75 crore in the quarter registering a rise of 4.49% over the previous quarter. It saw a growth of 37.24% year-on-year (y-o-y).

Annual result showed that revenue increased over previous year by 27.04% to Rs 29,275 crore where as net profit was up by 34% to Rs 7569.9 crore. The reason why percentage of net profit grew more than the percentage of revenue was because of other income. In the previous year (FY10) other income was Rs 177.6 crore, and the same contributed Rs 494.7 crore in FY11.

The company added a net 11,700 employees in the fourth quarter and had an attrition rate of 14.4%, according to the press release. It also said that volume growth in the fourth quarter was 2.9%. The utilisation rate, excluding trainess, was 82.4%.

TCS was trading at Rs 1,190 per share at 4.00 p.m. registering a fall of 2.31% at the Bombay stock Exchange.

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