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TCS: Sound performance on all parameters
Oct 20, 2012

Tata Consultancy Services (TCS) has announced its second quarter results of financial year 2012-2013 (2QFY13). The company reported a 5.1% quarter-on-quarter (QoQ) growth in its consolidated sales and a 7.1% QoQ increase in its consolidated net profits. Here is our analysis of the results.

Performance summary
  • Net sales grew by 5.1% QoQ in 2QFY13, the growth of sales in USD terms was very similar at 4.6%QoQ, while the constant currency growth was 4.8%QoQ. This implies that rupee depreciation did not have a meaningful impact on revenue growth during the quarter.
  • Operating margins declined marginally by 0.7% QoQ to 26.8% during the quarter as compared to 27.5% seen during the previous quarter (1QFY13). This was mainly due to higher cost of revenues (QoQ percentage increase of 0.85% on sales). This offset the positive impact of lower 'selling, general and administrative' expenses (QoQ percentage decrease of percentage decrease of 0.09% on sales).
  • Notwithstanding the slight margin contraction at operating levels, net profits grew by 7.1% QoQ on an absolute basis. Net profit margin improved by 0.4% to 22.5%. The growth in net profits was aided by higher other income during the quarter as well as a lower effective tax rate. The latter stood at 21% in 2QFY13 as compared to 22.2% in 1QFY13.
  • TCS added a net of 10,531 employees during the quarter. The total headcount of the company was 254,076 at the end of 2QFY13.
  • Attrition rate continued to drop and stood at 10.2% in IT services segment, lower than the 10.9% seen during the 1QFY13. In the BPO segment, attrition rate rose slightly to 20.9% as compared to 20.7% seen during 1QFY13.
  • The company added 41 new clients during the quarter. The total number of active clients at the end of the period was 1,041.
  • The company has declared a second interim dividend of Rs 3 per share (dividend yield of 0.2%)

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