Tata Consultancy Services-Q1 FY09

Tata Consultancy Services (TCS) is one of the top most IT conglomerate in India. It is one of the arms of Multi Billion TATA group. The company offers a wide gamut of services ranging from Business consulting, End-to-end Information technology application services to Business process outsourcing (BPO). The company operates in variety of segments and prominent among them are Banking, Financial services and Insurance (BFSI), retail, and telecom.

RECENT DEVOLEPMENTS

• TCS recently bagged a contract from a North American Wireless Telecom Major for installing and upgrading their ERP foot print.

• The company recently entered in to a contract with UK based Scottish water, a water utility firm for providing end-to-end IT application services.

• Virgin Atlantic a UK based airliner has renewed its contract with TCS till 2010 for providing total IT application and infrastructure services.

• Recently TCS bagged a five year contract worth $100 Million from NXP semiconductors firm of Europe for delivering IT applications services.

The company announced its first quarter results last week. The Q1 FY09 financial results are tabulated below

The company reported Net profit of Rs.12040.1 Million, an increase of 8.6 % over the last quarter and 12 % on YoY basis. The operating profit decreased by 1% and stood at Rs.12824 Million when compared to Rs.13046.2 Million derived in the last quarter ended March 31, 2008. The operating profit lowered because of increase in the high costs onsite revenues and increase of low-margin application development and maintenance (ADM) services. The company faced a foreign exchange loss of Rs.750 Million in the last quarter. Over all market growth for the company in this quarter remained 8%. The company’s business in North America, UK, and European markets grew by 6% and the Latin American business decreased by 9% as one of the major bank client was gone through a demerger process. Expect BFSI all other segments like retail, outsourcing, travel and hospitality segments saw a sharp growth in the last quarter. In the last quarter the company received many projects and System integration deals from Telecom equipment providers. The revenues from top 10 clients amounted to Rs.28.3 % of total revenue where in the last quarter it was 29%. As the company didn’t foray in to any new business segments the revenue from new businesses only accounted for .7% of the total contribution. The company, in the last quarter added 4495 trainees in the Indian units and 1582 in overseas branches.

STOCK OUTLOOK

The stock is now trading in the region of Rs.800-850.The stock was in a sharp decline since hitting Rs.1029 in the first week of June. But now the stock reacts well to the Q1 and started moving upwards from the level of Rs.740 to Rs.820. Both the short term and long term investors may pick this stock at this level as the market conditions and company’s performance will favor the investors. Indiamoving forward in the Nucleare deal with the US is likley to reinforce confidence of FIIs in Indian economy and the decline in crude oil prices have come handy to tackle the inflation.