TCS results to brighten IT sector outlook

Indian software giant Tata Consultancy Services (TCS) has logged impressive sales as well as profit growth, on the back of rising volume of work and aggressive cost management.

The company’s consolidated sales in the quarter ended 31 December 2010 rose by 4% over the previous quarter to Rs 9663 crore. This growth was higher than that of Infosys, whose sales grew by just 2.3% sequentially, and which had got affected by foreign exchange volatility.

On a year on year basis, the sales of TCS grew by 26%, for this quarter. This is matched by Infosys’ year on year growth of 24% for the current quarter.

The net profit growth of TCS has been robust, at 9% sequentially in the December 2010 quarter, and 30% year on year, to Rs 2,396 crore. The net profit growth of Infosys was lower at 2.5% and 14% in the comparable periods.

The jump in other income of TCS from Rs 71 crore, in the quarter ended September 2010, to Rs 194 crore in the quarter ended 31 December 2010 also played a key role in boosting profits. This includes foreign exchange income of Rs 52 crore.
Looking at the geographical performance, the company’s growth was driven by the mature markets of US, Europe, and also backed by the other regions – Asia Pacific, Middle East and Africa.

Investors were disappointed with Infosys’ results, as they expected the IT sector to offer a buffer from the macro problems facing companies exposed to the Indian market. TCS’ results will offer them hope again, that some part of the IT sector may indeed may give them a hedge against uncertainty in the domestic market.

Read the updates from TCS on its December quarter results here and its investor presentation here.

To be updated with more analysis.

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