Wednesday, April 25, 2012

TCS refuses to follow Infosys, to give increments


India's largest technology outsourcing services firm Tata Consultancy Services (TCS) laid to rest nagging concerns around industry growth by meeting earnings expectations in the March quarter, backed further by a confident commentary from the management on growth outlook. In stark contrast to cautious and diffident commentary from peer Infosys, TCS management said it is confident of growing faster than the industry.
"It is a normal year," said chief executive N Chandrasekaran.
"The order book is very healthy and has been continuously improving. We see very good momentum." Net profit in the fourth quarter grew 1.6% from preceding three months to . 2,932 crore on the back of revenues of Rs 13,259 crore.
Infosys to cut employees' variable pay | Infosys freezes salary increments

TCS, which crossed $10billion in revenues in fiscal 2012, does not give growth forecast. Infosys's disappointing growth and tepid forecast had raised concerns about the sector's growth prospects. But so far software industry body, which has projected an 11-14 % growth for the sector, has maintained its forecasts.

Justifying the stance, Nasscom president Som Mittal said US, the biggest buyer of Indian ITservices, was seeing a recovery and uncertainty in Europe was dissipating. Global-head of human resources , Ajoy Mukherjee, said employees would receive hundred percent of their variable pay for the fourth quarter.

TCS also intends to hand out an average of 6-8 % pay hike for its offshore employees and 4% foronshore employees.

Rival Infosys froze pay hikes for the year and is paying out only 70% of variable pay on an average for entry-mid level employees. "It has been a good year for us, and the employees have contributed to it. If it (pay hike) is going to add pressure on our profit margins, we will deal with it," Chandrasekaran told analysts in the earnings call.

Analysts were upbeat about the sector following TCS earnings. "TCS' performance is one step to clearing concerns around any potential slowdown for the industry. It shows the issues facing Infosys are more company-specific," said an analyst with a foreign brokerage.

Ahead of the earnings announcement, TCS shares fell 2.8% on BSE to close at Rs 1,059.25 on Monday, when benchmark Sensex ended 1.6% lower. However, along the lines of Infosys commentary, TCS' saw a flattish growth in financial services but Chandrasekaran said he did not see any cause for worry and there have been no project cancellations or ramp downs.

Infosys had blamed a few client specific issues for its dismal performance. TCS has signed three large outsourcing contracts from financial services clients. The IT firm intends to hire around 50,000 employees during FY13 against 70,000 gross hire in fiscal 2012

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