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TCS net falls 27.15% as employee bonus dents profit

Firm offers record Rs2,628 crore payout to staff on 10th IPO anniversary.

By: ENS Economic Bureau | Chandigarh/ Mumbai, Mumbai | Published: April 17, 2015 1:26:12 am
Net profit up 11.50% excluding employee bonus. Net profit up 11.50% excluding employee bonus.

After Infosys, Tata Consultancy Services, the country’s largest software company, is rewarding its employees handsomely. The firm is giving a one-time bonus of Rs 2,628 crore to the employees “to mark the 10th anniversary of its IPO”.

The bonus, however, has led to a 27.15 per cent fall in net profit at Rs 3,858.2 crore in the quarter ended March 2015 as against Rs 5,296.7 crore in the same period of last year. If the bonus is not taken into account, its profits would rise 11.50 per cent to Rs 5,905 crore.

The company said each employee will be given a reward equivalent to one week’s salary for every year of service completed at TCS. It had 3.18 lakh employees as of October-December 2014 quarter.

Earlier this year, Infosys had given 3,000 Apple iPhone 6s to 3,000 top performers. The company also announced a 20 per cent pay hike to employees who worked during the India-Australia semifinal match in the World Cup cricket on March 26.

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TCS posted a revenue growth of 12.38 per cent at Rs 24,219.8 crore in the reporting quarter, up from Rs 21,551.1 crore a year ago. Its profit for the full year rose by 2.78 per cent to Rs 19,648.4 crore. N Chandrasekaran, CEO and MD, said: “Our investments in platforms, digital and automation are gaining traction with clients and together with our market investments in USA, Europe and Japan, we are upbeat that the coming quarters will bring more opportunities to partner with customers across multiple industries.”

Analysts were not enthused by the TCS results. “Overall results are weak and have surprised us negatively. Chinks have started showing in numbers; telecom and energy (not a surprise) are additional sources of headwinds. Expect earnings downgrades of at least 3-4 per cent,” Kotak Securities said in a report.

“We have maintained our profitability in a challenging operating environment…” chief financial officer Rajesh Gopinathan said.

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