TCS Net Profit Beats Expectations, Outdoes Infosys Results

 
on July 13 2012 4:48 AM

Tata Consultancy Services (TCS), India's top IT exporter, exceeded the market expectations in the first quarter of the financial year 2012, by posting strong earnings and affirmed its position as the bellwether of India's IT industry.

TCS, a part the TATA conglomerate, reported a 38 percent annual jump in its first quarter profits at 32.8 billion rupees ($589 million), as compared with the 23.8 billion rupees a year earlier. Analysts' expectation, according to the Reuters data, was 30.5 billion rupees.

The company's revenue increased by 37.7 percent to 148.69 billion rupees from 107.97 billion rupees on a year-on-year basis.

TCS outperformed Infosys and reported results above analysts' expectations, while Infosys, the bellwether of India's IT industry for long, disappointed by cutting its FY 2013 sales forecast by 5 percent the same day.

The two quarter earnings reports of the two companies, working on the same platform, were totally at odds with each other in terms of outlook, growth prospects and forecast.

Infosys, which has been disappointing the markets in the last few quarters by repeatedly cutting its forecasts, had cited the uncertainty in global economic conditions, especially on the spending by its top clients in the U.S. and Europe, as the reason behind its lackluster performance.

TCS has given a more positive outlook on the same economic conditions and TCS Chief Executive Officer, N. Chandrasekaran said, We have seen strong, secular growth across all our service lines and industry segments driven by robust volumes from key markets like North America, Europe and the UK.  

The company also gave a better outlook in its reports and said that it will surpass the industry target growth rate set by the industry body NASSCOM and it has absorbed the impact of wage hikes and maintained the profitability in a volatile setting.

Meanwhile, Inofsys had said it had not considered any wage hikes for the employees at present.

Infosys is talking about an uncertain environment, clients not sure, budgets getting delayed, but if you look at TCS, they are saying clients are pretty aware, they have prepared the budget accordingly and they are spending their budget accordingly, Hardik Shah, analyst at KR Choksey Shares and Securities told Reuters.

Infosys's net addition of employees for the quarter stood at 1,157, while TCS made a net addition of 4,962.

TCS and Infosys form the backbone of India's $100 billion IT and ITES industry and earn nearly three-fourths of its revenues from the exports to the U.S. and Europe.

The quarter performances of both the companies were closely watched by the industry and economists, since it serves as an important indicator of the health of the country's IT sector, which is a significant contributor to India's export revenues.

The markets also reacted sharply to the quarter reports of the Indian IT giants, as Infosys shares slumped for the second consecutive day, shedding 9-11 percent of its value in the BSE Sensex; TCS shares, despite being overvalued, are rallying head.

TCS shares were trading at Rs.1,262.50, up 2.18 percent, while Infosys was trading 0.71 percent down at Rs. 2,249 in the afternoon session in BSE Sensex.

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