TCS plans to hire 50,000 staff this year

 

 

 

TATA Consultancy Services on Thursday announced a net profit of Rs 2,169 crore, up 32 per cent year-onyear, on sales that rose 25 per cent to Rs 9,286 crore, speeding past estimates and marking the company's first quarter with $2 billion in revenue.

A Bloomberg poll of analysts had forecast a net profit of Rs 1,990 crore on sales of Rs 8,850 crore.

TCS's revenue from North America alone crossed $1 billion. Infosys Technologies too had beaten estimates.

"We have had doubledigit volume growth across all our key verticals and geographies. This has driven the superior performance on the path to strong demand recovery," said N Chandrasekaran, CEO and MD of TCS.

The firm said operating margin at 28 per cent was a new high and it raised utilisation rate of employees, excluding trainees, to 83.8 per cent, a fresh high.

Dipen Shah, senior vicepresident ­ PCG research at Kotak Securities, said, "The 11 per cent volume growth was a positive surprise and so was the improvement in margins quarter-on-quarter.

The increase in hiring targets indicates higher business visibility."

Chandrasekaran said the utilisation rate could rise further to 85 per cent as it aims to respond to a recovery in demand with agility.

"We had said at the start of the year that we would be hiring 30,000 employees this year. But we have already hired as many in the first half itself. We expect to close the year by hiring around 50,000 employees and will hit colleges in November this year for campus recruitments," said Ajoyendra Mukherjee, head, global human resources, TCS.

Of the new hires around half are expected to be experienced staff and the rest are likely to be freshers. The company is looking at 11 large deals in the third quarter, said Chandrasekaran, illustrating the strong demand recovery and rosy outlook for infotech outsourcers. He forecast increased IT spend by clients next year.

Attrition at 14.1 per cent was about a percentage point higher than the July figure. "We are taking measures to control attrition, including promoting eligible junior employees once they complete two years rather than waiting for the end of the year. Line managers are closely examining career options for their teams too," said Mukherjee.

"In the quarter ended September 2010, we had a 103 basis points improvement in margins because of a favourable foreign exchange movement, a 54 basis points margin gain on account of lower intensity of selling, general and administrative expenses and a 95 basis points gain on account of an increase in productivity. This was partially offset by a 166 basis points increase in payroll costs on account of increased employee costs due to the effect of promotions and variable payout in the September quarter at 150 per cent," said S Mahalingam, chief financial officer.

Rupee fell against dollar, pound and euro by 1.8 per cent, 5.9 per cent and 3.5 per cent, respectively, in the quarter from the previous one. Mahalingam said in the current quarter rupee's exchange rate against the pound and euro was beneficial but no so against the dollar. "The rupee has appreciated by about four per cent against the dollar. We will have to deal with this and feel that we can manage margins at appropriate exchange levels," he said.

Chandrasekaran cautioned that the exchange rate was a big headwind for the current quarter. Macquarie said in a recent report that the company had done a commendable job of expanding operating margins by 3.1 percentage points in FY10 and has the greatest geographic dispersion including a focus on India.