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Tata Consultancy Services (TCS.BO, Neutral, Rs997.00)
Robust volumes; increased wallet share in 2011 – Volume growth in FY2012 should
be robust, assuming clients do spend on what they are planning to spend right now.
The company’s customer meets in the US, Europe, and Australia in the last two
months received positive feedbacks and customer spend next year should be higher
than this year through increased wallet share.
Higher demand led to increased lateral hiring in 2010 – Higher recruitment of lateral
hires in 2010 resulted in increased costs. Currently, 61% of employees have three-plus
years experience; the company wants to achieve a broader employee pyramid.
Margins to remain stable in 2011, pricing to pick up – With headwinds from
currency and wages being offset by better operating leverage and flattening of
employee pyramid through increased fresher hiring, margins should remain stable at
around 27%. Pricing increases should start showing up in early FY2012.
Scope of work expanding – Areas like infrastructure, process outsourcing are
witnessing expansion apart from the standard IT services. More complex projects
including consulting are coming from existing relationships.
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