Q2 FY11...TCS triumphs; Wipro misses target

Tata Consultancy Services (TCS) has reported a net profit of Rs21.69bn in the second quarter ended September 2010, up 32% from Rs16.42bn during the corresponding quarter last year. In dollar terms (US GAAP), the company reported its highest ever sequential growth of 30.3% in its top-line. In rupee terms, revenues stood at Rs92.86bn, up 25% as compared to Rs74.35bn during the corresponding quarter last year.



TCS reported a 11.2% volumes growth, the fastest in at least 10 quarters, fuelled by a double-digit growth across its major verticals. TCS' volume growth was significantly better than Infosys (7.2% QoQ) and HCL Tech (7.9% QoQ). TCS has delivered industry-best volume growth over the past six quarters. Growth remains broad-based with double-digit growth in almost all vertical and services. Management commentary on volume, pricing and margin remains sanguine; the company also increased its FY11 gross hiring target by 25%.

TCS delivered a material 70bps expansion in operating margin despite the headwinds of promotions and higher variable component. The operating margin stood at a new multi-year peak of 30% aided by favourable currency, productivity improvement and SG&A leverage. There was a material improvement of 290bps QoQ in utilization driven by the exceptionally strong volume growth witnessed.

Wipro Ltd. reported a ~10% rise in second quarter net profit, missing consensus expectations, as salary hikes and foreign exchange losses hit margins, sending the stock down. Net income for the July-September quarter was Rs12.90bn. Total revenue rose 12% from the same period last year to Rs77.30bn. Wipro forecast IT services revenue of US$1.32bn to US$1.34bn for the third quarter ending in December, up 3.5% to 5.5% from the second quarter.

"While the macro-economic environment continues to remain uncertain, there is a higher degree of confidence at the macro level," said Wipro's billionaire Chairman Azim Premji. Operating margins at Wipro's mainstay IT services business slipped to 22.2% from 24.7% in the previous quarter. Voluntary staff attrition for the quarter was 23.5%, up from 10.5% during the same period last year. Infosys Technologies last week beat analysts' profit estimates and raised its annual sales forecast but warned currency volatility could crimp growth for the industry.