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Tata Consultancy Services
We hosted TCS’ CFO Mr. S Mahalingam for interaction with investors at the DB Access India
Conference. The salient points discussed by him were as follows:
Market share gains drive demand momentum
TCS believes that even though client budgets have not increased substantially for CY11, the
company has made market share gains due to (a) vendor consolidation and (b) greater shift
towards offshoring. Owing to this the demand momentum across verticals like BFSI (banking
financial services and insurance),telecom , retail and energy and utilities continues to be
strong. Confidence in the positive demand outlook is also underlined by a continuation of the
demand recovery in the key market i.e North America (55% of revenues)
Pickup in demand from continental Europe
The company has seen good improvement in demand from continental Europe . This is
particularly from key markets like Nordics, Benelux , Germany and Switzerland .
Sustainable high operating margin
Even though TCS is operating at its life high operating margins (28.1% EBIT in 3QFY11), the
management believes that this is sustainable. Almost half of the ~400bps improvement in
margins achieved by the company over the last 10 quarters was on account of the changes in
organisation structure introduced by the company in Apr-08. Ability to maintain high utilisation
(by running a leaner bench) and improvement in business mix should be key margin levers
going forward. Wage increase is the sole threat to margin expansion but the company should
be in a position to mitigate this risk with the abovementioned margin levers.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Tata Consultancy Services
We hosted TCS’ CFO Mr. S Mahalingam for interaction with investors at the DB Access India
Conference. The salient points discussed by him were as follows:
Market share gains drive demand momentum
TCS believes that even though client budgets have not increased substantially for CY11, the
company has made market share gains due to (a) vendor consolidation and (b) greater shift
towards offshoring. Owing to this the demand momentum across verticals like BFSI (banking
financial services and insurance),telecom , retail and energy and utilities continues to be
strong. Confidence in the positive demand outlook is also underlined by a continuation of the
demand recovery in the key market i.e North America (55% of revenues)
Pickup in demand from continental Europe
The company has seen good improvement in demand from continental Europe . This is
particularly from key markets like Nordics, Benelux , Germany and Switzerland .
Sustainable high operating margin
Even though TCS is operating at its life high operating margins (28.1% EBIT in 3QFY11), the
management believes that this is sustainable. Almost half of the ~400bps improvement in
margins achieved by the company over the last 10 quarters was on account of the changes in
organisation structure introduced by the company in Apr-08. Ability to maintain high utilisation
(by running a leaner bench) and improvement in business mix should be key margin levers
going forward. Wage increase is the sole threat to margin expansion but the company should
be in a position to mitigate this risk with the abovementioned margin levers.
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