A special one-time bonus for its employees caused the fourth quarter net profit of India’s top software services exporter Tata Consultancy Services (TCS) to fall about 30 per cent. Not counting that, it managed to increase net profit by 7.7 per cent to Rs 5,773 crore, in an environment of strong currency volatility.
The company’s revenue for the period rose 12.4 per cent at Rs 24,220 crore.
TCS’ operating profit for the period was up 2 per cent at Rs 6,439 crore while operating margin declined by 271 basis points at 26.6 per cent. The net profit margin was down 103 basis points at 23.8 per cent. The figures are post the bonus adjustment.
“In what is traditionally a weak quarter, TCS has reported exceptionally good results with an incredible performance,” N. Chandrasekaran, MD & CEO, TCS told a press conference. “While our revenues were a tad below expectations of the street, our bottomline, profits and margins were above estimates.”
Mr. Chandrasekaran pointed out that the company was vindicated in its earlier flagging of the major headwinds it had expected to face during the period. “The headwinds were the energy sector due to oil, the volatility in the telecom sector and our Diligenta’s insurance platform.”
Growth leadership
For the year, TCS reported a 14.3 per cent growth in net profit at Rs.21,912 crore (excluding one-time special employee reward) with a 15.7 per cent growth in revenues at Rs.94,648 crore. Operating profit was up 6.3 per cent at Rs.25,311 crore with operating margin down 235 basis points at 26.7 per cent. The company declared a total dividend of Rs.79 per share including proposed Rs.24 as final dividend.
TCS CEO said that barring the three headwinds, the deal momentum and pipeline were very good. “TCS is playing a leading role in the ongoing revolution, helping clients navigate and leverage digital to help growth their businesses. We are very well placed for the future and on our digital platform, cloud did exceptionally well with revenues of $125 million and growing at 55 per cent.”
Mr. Chandrasekaran also said other than cloud, neural science and machine learning (self learning software) were huge initiatives for the company. “The initial pilots were successful and we will announce a big initiative in the next few months.”
Ajoyendra Mukherjee, EVP, Head, Global HR, TCS, said that during 2014-15, the company integrated over 67,000 professionals. “We have made 25,000 offers on campus and they will join us in the second quarter.”
The gross addition during the year was 67,123 associates and closing headcount was 3.20 lakh. On prospects in the current year, Mr. Chandrasekaran said in terms of deal size, order book and client sentiment, “all look positive. We have laid a strong foundation for growth in 2015-16. Our investments in platforms, digital and automation are gaining traction with clients and together with our market investments in USA, Europe and Japan, we are upbeat that the coming quarters will bring more opportunities to partner with customers across multiple industries.”
One-time Bonus to mark 10th anniversary of IPO
TCS said it will pay employees a special one-time bonus to mark the 10th anniversary of the company’s initial public offering in 2004. Employees who have completed at least a year of service are eligible for the special bonus payment and will be given a reward equivalent to a week’s salary for every year of service completed at TCS. The total consideration for this exercise is Rs 2,628 crore.
