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TCS: Healthy growth in an uncertain environment

Apr 24, 2012

Tata Consultancy Services (TCS) has announced the fourth quarter results of financial year 2011-2012 (4QFY12). The company has reported a 0.4% quarter-on-quarter (QoQ) growth in its sales and a 1.6% QoQ increase in its net profits. Here is our analysis of the results.

Performance Summary
  • Net sales grew by 0.4% QoQ in 4QFY12, largely driven by a good growth in volumes which was 3.3% QoQ during the quarter. For the year ended March 2012 (FY12), sales grew by 31.0% Year-0n-Year (YoY). This came on the back of a 23% YoY growth in volumes and 1.3% YoY increase in average realization during the year.
  • The growth in revenues was 2.3% QoQ on constant currency basis. In terms of US dollar revenues, the growth in sales was 2.4% QoQ during the quarter.
  • Operating margins declined by 1.6% QoQ to 27.7% during the quarter as compared to 29.2% seen during the previous quarter (ending December 2011). This was mainly due to higher selling, general and administrative expenses (as a percentage of sales). For FY12, margin at operating level was slightly lower at 27.6% as compared to 28.1% in the same period last year.
  • Despite margin contraction at operating levels, net profits grew by 1.6% QoQ during the quarter. Profits would have been lower if not for higher other income and lower effective tax rate during the quarter. For FY12, net income increased by 21.9% YoY.
  • Added a net of 11,832 employees during the quarter. During FY12, TCS added 39,969 employees on net basis.
  • Attrition rate currently stands at 11.1% in IT services segment, lower than the 11.7% seen during the previous quarter (3QFY12). In the BPO segment, attrition came down to 21.6% as compared to 22.6% seen during 3QFY12.
  • The company added 42 new clients during the quarter. The total number of active clients at the end of the period was 1,037.
  • Proposed a final dividend of Rs 8 per share and a special dividend of Rs 8 per share. Including this, total dividend for FY12 is Rs 25 per share (yield of 2.1%).

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