TCS scores above Infy despite rising rupee, wages

WHO DARES WINS: TCS has battled its way to profits against rupee appreciation, CEO S Ramadorai (r) said.

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New Delhi: The rising rupee has impacted the country’s largest software exporter Tata Consultancy Services (TCS). But one look at its Q1 results shows that the IT bellwether has fared much better against the currency pressure than its counterpart rival Infosys, thanks largely to forex hedging gains and lower provisioning for taxes.

TCS profit after tax margins for Q1FY08 stands at 23.6 per cent stable as compared with it’s previous quarter. Whereas, Infosys profit after tax margins were at 28.7 per cent down 300 basis points as compared to the previous quarter.

Attrition has been stable at TCS at 13.7 per cent while its employee utilization rate stands at 70.5 per cent. “Despite factoring in wage hikes and an appreciating rupee, we have maintained profitability by great execution, demand creation and strong financial management,” TCS CEO and MD S Ramadorai was quoted by PTI.

TCS posted a 1 per cent growth in revenues and net profit to Rs 5,202.89 crore and Rs 1,202.93 crore respectively over the previous quarter, even as its dollar revenues showed an 8 per cent sequential growth. It has announced a dividend of Rs 3 per share. The rising rupee eroded operating margins by 258 basis points, which was partly offset by hedging gains of Rs 107 crore.

So, while operating profits fell from Rs 1,464.16 crore to Rs 1,338.63 crore, its net margins remained constant at 22.8 per cent.

The topline suffered a Rs 135 crore impact because of the 7 per cent rupee appreciation. The rupee had climbed 6.8 per cent against the dollar in the three months ended June 30, its biggest gain in more than three decades, according to data compiled by Bloomberg.