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Tata Infotech: Cutting costs

Jun 6, 2001

Tata Infotech Ltd. has posted a significant growth of 117.5% in net profits for FY01. The company was able to show the strong growth in net profits due to improvement in operating margins. The company improved its operating margins by 230 basis points. The company managed this feat by reducing its staff cost that fell to 20% of revenues in FY01 compared to 25% in FY00.

(Rs m)FY00FY01Change
Other Income10284-17.2%
Operating Profit (EBDIT)22739775.2%
Operating Profit Margin (%)5.4%7.7%-
Interest 30301.0%
Profit before Tax122274124.4%
Profit after Tax/(Loss)121265119.0%
Net profit margin (%)2.9%5.2%-
Adjustment for prior years' taxation10-
Profit after Tax/(Loss)*122265117.5%
No. of Shares (eoy) (m)18.418.4-
Diluted number of shares18.418.4-
Diluted Earnings per share6.614.4119.0%
P/E (at current price) 12.3 

The growth in total income from operations was 22% for the year. The company also wrote off bad debts to the tune of Rs 101 m excluding which the company would have posted even higher growth in profits.

At a current market price of Rs 176, the stock is trading at a P/E multiple of 12 times if FY01 earnings.

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