India’s largest IT company, Tata Consultancy Services (TCS), on Monday declared a 7% rise in net profit for the fourth quarter of 2008-09, at Rs 1,333 crore, in line with market expectations. The company announced a bonus issue in the ratio of 1:1, subject to regulatory approvals. This is in addition to a total dividend of Rs 14 per share.

Announcing the results, S Ramadorai, managing director & CEO of TCS, said, “in an unpredictable operating environment, TCS has delivered healthy topline growth of 23% and crossed the $6-billion milestone in revenues. By focusing on operational efficiencies, collecting cash more efficiently and driving an enterprise-wide cost control programme, we have improved our profit margins and continue to generate significant cash flows. Even after the recent cash acquisitions, we have cash of nearly Rs 4,300 crore.”

The TCS results come five days after Infosys Technologies, the second largest IT company, predicted a drop in its 2009-10 revenues by 6.7% to 3.1%. The lower guidance was interpreted by the stock markets as an indication that the global financial meltdown has taken its toll on the outsourcing business and that the earnings of TCS and Wipro Technologies would be weak.

TCS acknlowedged that it is facing pressure from its clients to rework prices. N Chandrasekaran, chief operating officer & executive director, said, “We have seen pricing pressures with a decline of 44 basis points across FY09 and we expect a lower, single-digit impact on the pricing next year as well. Of our top 100 clients, 40-45% are reporting a decline in revenues and 50% of them are reporting a decline in profits. So, some of these clients are looking at price negotiations and some are looking at other options.”

... contd.