TCS Q3 net up 14% at Rs 6,083 crore

India's largest software exporter TCS on Tuesday reported 14.2 per cent jump in profit to Rs 6,083 crore (Rs 60.83 billion) for the third quarter of the current fiscal.

The company had reported a net profit of Rs 5,328 crore (Rs 53.28 billion) in the October-December period of last fiscal. The operating profit was at Rs 7,276 crore (Rs 72.76 billion) in the reported quarter.

Its revenues were up 11.7 per cent to Rs 27,364 crore (Rs 273.64 billion) in the third quarter, 2015-16, from Rs 24,501 crore (Rs 245.01 billion) in the corresponding period of 2015-15.

"All our industry segments have exhibited growth in a traditionally weak quarter, additionally accentuated by the impact of the Chennai floods," N Chandrasekaran, managing director and chief executive, TCS said.

"Our international business has grown smartly in constant currency terms with North America and Europe leading the way among major markets and Latin America among growth markets," he said.

He added that digital business continues to be the core focus for enterprise IT in 2016 as customers respond to competition in a global economy driven by real-time insights.

"With 13.7 per cent of our revenues coming from Digital business and this segment growing at a higher sequential rate, TCS is playing an impactful role in partnership with customers," he said.

TCS said the growth was "holistic" with all industry segments showing sequential growth with life sciences and healthcare, manufacturing and hi-tech leading the way.

The company declared a dividend of Rs 5.50 per share which has a face value of Re 1, and its earnings per share (EPS) stood at Rs 31.01. 

Europe and North America led the growth in major markets while Latin America and Asia Pacific led the growth markets.

Among service lines, Infrastructure Services and BPS were the leaders, it said.

The company said its employee addition stood at 22,118 (gross) and 9,071 employees (net) to take its overall headcount to 3,44,691 people.

"Our efforts to increase employee retention is working with quarterly attrition rates falling in Q3," Ajoy Mukherjee, executive vice president and global head (HR), TCS said.

"Our hiring continues to support strong business growth and we continue to invest in building digital skills, with over 70,000 TCSers undergoing training in new technologies this year."

The company said the number of $100 million clients increased by 1 to 34 and $20 million was up by 2 to 173.

Rajesh Gopinathan, chief financial officer at TCS said the company has operated with rigour and discipline to deliver credible margin performance and generated excellent cash flows in a challenging quarter with significant cross currency and other headwinds. 

World's 10 attractive BPO destinations

India has been ranked as the world's biggest outsourcing destination in terms of financial attractiveness and business environment.

Image: India is the top BPO hotspot. 

A T Kearney's 2016 Global Services Location Index (GSLI) rated India as number one out of the total 55 countries analysed in three categories - financial attractiveness, people skills and availability, and business environment.

Take a look at the top 10 BPO hotspots...

India
Rank: 1
Score: 6.49

Offshoring to India remains a high attractive proposition for many companies, notes the study.

One advantage of tier 3 cities is the relative affordability of real estate as facilities in Nagpur and Ahmedabad are 25 per cent to 30 per cent cheaper than Kolkata and Delhi, the report said.

"While India and the Philippines are still top of mind when it comes to offshoring, the hunt for new talent is now taking companies beyond these countries' capitals and major cites to tier 3 locations such as Surat, Nagpur, and Lucknow in India and Bacolod and Iloilo City in the Philippines," said Nikolai Dobberstien, partner with A T Kearney's Communications, Media and Technology practice. 

Image: China is fast catching up with India.

China
Rank: 2
Score: 6.49

China is fast catching up with India by building on educational skills and governance.

"Even though the top six or seven countries are landing in the same order this year as 2014, looking forward, this could all change radically because the very nature of what's being outsourced is changing," said Arjun Sethi, global leader of A T Kearney's strategic IT practice.

Image: Malaysia has a steady score in financial attractiveness. 

Malaysia
Rank: 3
Score: 6.05

Malaysia has a steady score in financial attractiveness, people skills and availability and business environment.

Image: Brazil scores well on the Index. 

Brazil
Rank: 4
Score: 6.00

Brazil has jumped 4 places in the index due to its currency devaluation.

Image: Indonesia is a promising BPO destination. 

Indonesia
Rank: 5
Score: 5.99

One of the world’s most promising destinations in the world, Indonesia has a talented workforce, good financial profile and infrastructure.

Image: Thailand scores high on financial attractiveness. 

Thailand
Rank: 6
Score: 5.92

Thailand has an educated population and scores high on financial attractiveness.

Image: Philippines has scored high on infrastructure. 

Philippines
Rank: 7
Score: 5.88

Philippines has scored high on infrastructure, environment and tax and regulatory costs.

Image: Mexico has moved down by 4 places. 

Mexico
Rank: 8
Score: 5.87

Mexico has moved down by 4 places to be at the 8th rank. The country scores higher in financial attractiveness.

Image: Chile has moved up by 4 ranks. 

Chile
Rank: 9
Score: 5.72

Chile has moved up by 4 ranks to 9th rank in 2016.

It scores well on business environment and has a robust education system.

Poland Rank: 10

Score: 5.68

Poland moved into the top 10 this year with good improvement in compensation costs. 

Microsoft brings Surface to India for Rs 89,990

Microsoft Surface Pro 4 comes with a 12.3-inch display and runs on the Windows 10 operating system.

Technology giant Microsoft has finally brought its 'Surface' range of tablets to the Indian market with the latest version - Surface Pro 4 - priced at Rs 89,990 onwards.

Designed to run full Microsoft Office, the Surface Pro 4 includes Windows Hello, Surface Pen, Microsoft Edge and Cortana.

In November last year, Satya Nadella, the India-born chief of Microsoft, had announced that the company will bring the device to India soon.

"Surface Pro 4, the most awaited tablet, is now available in India. It is a perfect choice for people who place a premium on portability, yet require more productivity and performance out of their devices," Bhaskar Pramanik, chairman, Microsoft India said.

Microsoft Surface Pro 4 comes with a 12.3-inch display and runs on the Windows 10 operating system.

It is available in three Intel processor options: i3, i5 and i7. Buyers can choose between 4GB and 8GB of RAM and 128GB and 256GB of storage.

The Surface Pro 4 comes with USB 3.0 port, card reader, 5MP front and 8MP rear camera. It has Dolby audio for sound enhancement.

The previous version of the tablet, Surface Pro 3, will be available for Rs 73,990 onwards. Buyers can book the device on ecommerce portal Amazon.in from today and deliveries will commence from January 14.

Microsoft also said 200 million computers are now running on Windows 10. Launched about six months ago, this is the fastest-growing OS release in Microsoft's history. 

HCL Tech changes staff cost structure

Converts part of fixed salary component into variable one

HCL Technologies, India’s fourth largest information technology (IT) services company, is learnt to have tweaked its employee salary structure by converting a part of their fixed salary into variable one, a move IT companies usually undertake when they sense unpredictability in revenue inflow.

According to employees and analysts, the restructuring of employee salary was effected after its annual wage hike this year. The company had announced a wage hike of eight per cent to its offshore employees and two per cent to onshore employees with effect from July and October, respectively.

Sources also added mostly the delivery and sales organisations of the company have been affected by this move, while the annual hike for support staff is yet to be announced.

“This move, which came along with the latest performance appraisal, has reduced the overall wage cost of the company. The change in variable component of the salary varies across the level, but in majority of the cases the net salary outflow has been lower for the company,” said a Mumbai-based analyst.

Employee variable costs in IT services companies vary on seniority. While for the entry level and junior employees, it could be in the range of 10-20 per cent, it can go as high as 50 per cent in the case of senior staff, according to HR experts.

While HCL Technologies did not elaborate about this move and its reasons, in reply to an email, it said, there has been “no change in the net take-home earning potential for our employees”.

“At HCL, we are committed to design people practices that ensure the organisation is future ready for the 21st century – and recognise and reward employees behaviours and beliefs that enhance the ‘value zone’ in their interaction with employees,” a company spokesperson said in an email statement.

“Recognising that client centricity and collaboration is critical to individual and collective success, we have linked performance bonuses to meeting engagement and client specific goals rather than rewarding individual productivity goals only,” it added.

Analysts, however, say increasing variability in cost structure could be a reflection of slower revenue growth, the company might be anticipating to witness. Interestingly, the Noida-headquartered company in a regulatory filing on this Thursday said it was expecting tepid revenue growth for the quarter ending September this year on account of client issues, transition timelines for complex engagements and adverse currency impact.

The company also said it was considering setting aside around $20 million, owing to some differences with a large client on the programme objectives of a contract.

Experts believe it could be a case of falling margins apart from decelerating revenue growth. “HCL Tech has witnessed steady deceleration in revenue momentum along with erosion in operating margin. Over the past eight quarters, year-on-year revenue growth has moderated to 9.3 per cent (Q4FY15) from around 14.5 per cent in Q2FY14, whereas Ebitda (earnings before interest, tax, depreciation and amortisation) margin has eroded to 21.5 per cent (Q4FY15) from 26.3 per cent (Q1FY14),” according a recent report by a brokerage firm.

IT companies usually try to make their cost structure variable when they anticipate some volatility in the demand environment. For example, Mphasis, a Bengaluru-based mid-sized IT services company, in the past had converted a part of the employees fixed salary component into variable. However, that was the time when the industry was just emerging out of the impact of a global economic recession.

However, in a recent past, there had not been any instance of any IT services company adopting this practice. Instead, in 2013, Infosys, India’s second largest IT services company, restructured employees salary by increasing the fixed component in their salary, in order to tame attrition which was steadily on the rise.

Employee salary accounts for about 70 per cent of IT services companies’ overall revenues. In case of HCL Tech, the salary bill accounted for close to 66 per cent of its overall revenues at the end of Q3 FY15, up from around 61 per cent in Q1 of FY14.