TCS communication to employees ...

Dear Colleagues,

Last week, TCS posted results for the third quarter of 2007-08 with revenues rising at 5.04 per cent sequentially to Rs 5,924 crore and net profits rising 6.72 per cent sequentially to Rs 1,331 crore.

As you are well aware, our variable compensation policy is linked to EVA, based on the overall performance of the company and your individual performance. The variable pay component is paid monthly, based on the company’s expected performance for the quarter. As indicated in the annual compensation letters, variable pay may change based on actual performance of the company and the ongoing performance of the individual.

In Q3 this year, we met our revenue target but we fell short of meeting our EVA target due to a combination of internal and external factors. The EVA target forms the basis for the variable pay computation and has been given in advance, each month during Q3. Based on the audited results the EVA-based variable payout amounts to Rs. 293 crore for the quarter. The actual variable payout based on expected EVA given in advance amounts to Rs. 376 crore. The advance payment that has to be adjusted amounts to Rs. 83 crore, which will be recovered during Q4 from the employees. The recovery would be reflected in your salary in the months of February and March 2008.

TCS continues to enjoy industry-leading growth. We expect to meet our EVA targets in Q4. There is a strong business pipeline and we are very positive about the future. In order to be globally competitive and maintain our leadership position, we not only need to grow revenues, but also manage our costs better and enhance operational efficiencies.

In Q4, we will follow the same basis of advance payment of Variable Pay as per expected EVA projections at the beginning of 2007-08. When the audited results for Q4 are announced in April 2008, appropriate adjustment in Variable Pay will be made either upwards or downwards as the case may be.

We will shortly let you know the actual amount to be recovered through a letter in Ultimatix. On viewing your letter, in case you need any further clarification, please send in your query to the following mail address – ......@tcs.com and we will respond to your questions