TCS reports profit fall

Indian IT firms are finding profits harder to come by in a recession

Tata Consultancy Services (TCS) has become the latest offshore outsourcing firm to report a fall in profit.

TCS – the biggest Indian IT provider – announced record annual revenue, up 23 per cent to $6bn (£4.1bn), but net profit fell 10 per cent to $1.12bn (£771m).

Results for the firm’s fourth quarter were more positive, with sales up 18.6 per cent year on year to 71.7bn rupees (£984.5m), and net profit up 4.7 per cent to 13.1bn rupees (£180m).

Last week, rival Infosys reported a 1.8 per cent year-on-year decline in sales and a 2.6 per cent drop in profit for its fourth quarter.

“In an unpredictable operating environment, TCS delivered healthy top-line growth of 23 per cent and crossed the $6bn milestone in revenue,” said TCS chief executive S. Ramadorai.

“By focusing on operational efficiencies, collecting cash more efficiently and driving an enterprise-wide cost control programme, we have improved our profit margins and continue to generate significant cash-flows.”

The company has undergone a process of strict financial controls, according to chief financial officer S. Mahalingam.

“We have effected cost efficiencies without impacting growth drivers. We have exercised all levers including driving a higher revenue and controlling all expenses,” he said.

“Besides bottom line improvement, we have also reduced the number of debtor days outstanding by 12 days in the last two quarters, reducing costs on travel, communications, rationalising infrastructure and optimising resources.”

TCS’ European business grew 39 per cent annually, with the UK showing good growth despite weaknesses in the telecom sector, said the supplier.

And Indian firms remain prodigious recruiters – TCS’ staff numbers grew by 48,595 since the same quarter last year, to 143,761 employees.