CMC, a 51.12% subsidiary of TCS reported 45% increase in revenues to Rs 396.17 crore for the quarter ended December 2011 as compared to the quarter ended December 2010. The increase in revenues was due to significant increase in revenues from System Integration (SI) and Customer Services (CS) business.

OPM however declined by a steep 370bps to 15.2% on the back of substantial increase in sub contracting costs. Operating profit thus grew a meager 16% to Rs 60.35 crore. The resulting PAT de-grew by 9% to Rs 41.37 crore marred by high tax rate of 29.23% as against 14.9% in corresponding period due to expiry of tax benefits under STP with effect from April 1, 2011.

American subsidiary grew 55% y-o-y in dollar terms and International business share stood at 61.5% during Q3.

The company has added 1474 net employees during the current quarter buoyed by the growth in business and cumulative addition of 2578 employees during first nine months. The attrition rate during the quarter fell to 18.7% from 22.2% in the previous quarter.

Quarterly performance

During Q3FY12, revenues increased by 45% to Rs 396.17 crore due to significant 58% increase in revenues from System Integration (SI) to Rs 227.62 crore (57% of total revenues) and 28% increase in revenues from Customer Services business to Rs 93.15 crore (24% of total revenues).

PBIT margins of Customer services segment which are lowest among all segments improved by 62bps to 8.08% but fell across all other segments more particularly in System Integration where PBIT margins fell by 722bps to 22.93% thereby leading the decline in overall OPM by 370bps to 15.2%. Sub contracting costs were up 725bps to 30.55% of sales, Material costs increased by 12bps to 12.29% of sales but staff costs were down by 277bps to 29.7% of sales. The operating profit thus grew by only 16% to Rs 60.35 crore.

Other Income fell by 6% to Rs 3.93 crore and while Interest Expense declined by 84% to Rs 1 lakh, depreciation charges rose by 113% to Rs 5.82 crore leading to only 10% increase in PBT to Rs 58.46 crore. Provision for taxes increased by 115% to Rs 17.1 crore with effective tax rate up from 14.9% to 29.23%. Overall, Net profit de-grew 9% to Rs 41.37 crore and PAT margin declined by 611bps to 10.44%.

Among the other segments, ITeS registered 35% growth at Rs 55.1 crore comprising 14% of total revenues. Education & training rose by 19% to Rs 15.11 crore comprising 4% of total revenues and SEZ which relates to development and renting of SEZ facilities grew 73% to Rs 5.27 crore comprising 1% of total revenues.

At operating level, ITeS registered 17% growth in PBIT to Rs 17.1 crore (21% of total PBIT), margins fell by 462bps to 30.95%. PBIT of E&T which contributes 2% to total PBIT decreased by 41% to Rs 1.58 crore and PBIT margin decreased by 1041bps to 10.43% and SEZ PBIT increased by 1% to Rs 2.96 crore (4% of total PBIT) and margins declined from 96.18% to 56.12%.

Nine month performance

For the nine months ended December 2011, sales grew by 34% to Rs. 1059.45 crore, operating profit margin worsened by 460bps to 15.5%, which resulted into operating profit growth of only 4% to Rs 164.26 crore.

Other income saw growth of 27% to Rs 11.44 crore. Interest expense came down by 96% to Rs 1 lakh as company has paid back loans. After accounting for 102% increase in depreciation charges to Rs 14.96 crore and increase in tax rate from 15.32% to 32.26%, PAT de-grew by 20% to Rs. 108.88 crore.

CS segment has seen growth of 29%, SI segment seen growth of 43%, ITES records 17% growth and E&T segment was up by 11%.

FY2011 Performance

On the back of 23% growth in SI revenues to Rs 577.34 crore (53% of total revenues), 54% growth in ITES revenues to Rs 169.65 crore (16% of total revenues), 12% increase in CS revenues to Rs 271.32 crore (25% of total revenues) and 28% increase in E&T revenues to Rs 53.24 crore (5% of total revenues), CMC registered 24% upside in consolidated revenues to Rs 1084.4 crore for the financial year ended March 2011.

The operating margins improved by 30bps at 19.4% on the back of higher employee productivity, lower material costs and change in mix. As % of sales, material costs were down 254bps to 11.19% and other expenses were down 250 bps to 13.36% although sub contracting costs increased by 438bps to 24.19%. The resultant operating profits were up 26% at Rs 210.71 crore. Other income fell 11% to Rs 11.8 crore. Interest expenses fell by 93% to Rs 22 lakh, but on a lower base. Depreciation charge increased by 6% to Rs 10.46 crore. The resultant PBT was up 26% at Rs 211.83 crore.

The tax provisioning increased 34% to Rs 32.42 crore with effective tax rate up 84bps to 15.3%. The resultant consolidated PAT of the company grew 25% to Rs 179.41 crore and PAT margin was up by 20 bps to 16.54%.

PBIT margins for CS business worsened by 33bps to 8.24%, of SI business improved 141bps to 30.55%, of ITES business fell 110bps to 34.94% whereas that of E&T jumped 983bps from 10.8% to 20.63%.

R Ramanan, CEO and MD

The company has built strong growth momentum in challenging business environment with all geographies contributing to growth. The company added 21 clients across geographies.

Valuation

Shares of CMC closed at Rs 918.8 on 13^th January 2011.

CMC : Consolidated Results

CMC : Consolidated Segmental financials