Tata Consultancy Services (TCS) was off to a flying start in 2014-15 with a 27 per cent higher net profit at Rs.5,058 crore in the first quarter ended June 30 2014. Revenue for the period was up 23 per cent at Rs.22,111 crore.
Operating income was up 19.6 per cent at Rs.5,815 crore. Operating margin dropped 10 basis points at 26.8 per cent. Volumes grew 5.7 per cent.
Special dividend
The company announced a dividend of Rs.5 per share and on the occasion of the 10th anniversary of the company’s IPO (initial public offering), the board announced a special dividend of Rs.40 per share, taking the total dividend to Rs.45 per share.
Addressing media, N. Chandrasekaran, CEO and Managing Director, said that robust volumes and healthy growth across all industries and key markets “helped TCS start the new financial year on a strong note as our broad-based business portfolio continues to deliver results.”
In dollar terms, the quarter saw TCS post its highest incremental revenue of $191 million in the last 15 quarters. “Growth was broad-based with U.S. growing 5.7 per cent and Europe, the U.K. and India growing above 5 per cent,” he said, adding that it was muted only in the Middle East and Africa.
Demand pipeline
In terms of verticals, all segments grew above 5 per cent except insurance, which the company said would pick up later in the year. “We have a strong demand pipeline in place and our customer-centric mindset leadership in ‘digital’ space and strong execution capabilities will help us to sustain our momentum,” he said adding that rather than large orders, the digital space was seeing several smaller orders.
Rajesh Gopinath, CFO, said the impact of currency on margins was 73 basis points, depreciation was 79 basis points and the wage hike was 219 basis points. However, operational efficiency led to a gain of 85 basis points.
Currency could be a headwind for the company “but as long as there is no big volatility, we will be able to manage it in an operational way,” the CEO said.
The company won seven large deals across six verticals, including two in retail and one each in lifesciences, hi-tech, banking and insurance. “We have a pipeline of eight large deals under discussion,” Mr. Chandrasekaran said adding that in terms of client spend there was a huge push towards simplification, digital and regulatory compliance.
Attrition
In terms of human resources, gross additions were 15,817 and net additions 4,967. TCS’ total employee strength at the end of the quarter was 3.05 lakh with a record utilisation rate (excluding trainees) at 85.3 per cent and 79.8 per cent, including trainees. The attrition was at seasonally higher 12 per cent. The company plans to hire 55,000 people this fiscal.