CMC, a 51.12% subsidiary of TCS reported 39% y-o-y increase in consolidated revenues to Rs 409.9 crore for the quarter ended March 2012. The increase in revenues was due to significant increase in revenues from System Integration (SI) and ITeS business.

OPM however declined by 300bps to 14.7% on the back of substantial increase in sub contracting costs. Operating profit thus grew 15% to Rs 60.07 crore. The resulting PAT de-grew by 2% to Rs 42.93 crore as sharp rise in other income was offset by increase in tax rate.

During FY12, revenues grew 35% to Rs 1469.34 crore. However, OPM fell sharply by 410bps to 15.3% as sub contracting costs rose sharply which led to a muted 6% increase in operating profits to Rs 224.32 crore. Net profit de-grew 15% to Rs 151.81 crore as increase in other income was more than offset by sharp increase in tax rate due to expiry of benefits under STPI with effect from April 2011.

The company has added 801 net employees during the current quarter and cumulative addition of 3379 employees during 2011-12 taking its total employee count to 10,775 as on 31^st March, 2012.

Quarterly performance

On y-o-y basis, revenues increased by 39% to Rs 409.9 crore due to significant 50% increase in revenues from System Integration (SI) to Rs 236.52 crore (58% of total revenues) and 55% increase in revenues from ITeS business to Rs 69.01 crore (17% of total revenues).

PBIT margins worsened across all segments, of Customer services segment which are lowest among all segments worsened by 109bps to 5.13%, System Integration margins fell by 930bps to 20.65%, ITES by 602bps to 27.95% and E&T by 714bps to 13.11% thereby leading the decline in overall OPM by 300bps to 14.7%. Sub contracting costs were up 869bps to 33.38% of sales but Material costs declined by 293bps to 9.81% of sales and staff costs were down by 240bps to 28.94% of sales. The operating profit thus grew by only 15% to Rs 60.07 crore.

Other Income grew by 114% to Rs 6.02 crore and while Interest Expense declined by 30% to Rs 0.63 lakh, depreciation charges rose by 110% to Rs 6.41 crore leading to only 15% increase in PBT to Rs 59.66 crore. Provision for taxes increased by 111% to Rs 16.73 crore with effective tax rate up from 15.25% to 28.05%. Overall, Net profit de-grew 2% to Rs 42.93 crore and PAT margin declined by 448bps to 10.47%.

Among the other segments, CS registered 11% growth at Rs 82.9 crore comprising 20% of total revenues. Education & training rose by 4% to Rs 14.85 crore comprising 4% of total revenues and SEZ which relates to development and renting of SEZ facilities grew 114% to Rs 6.67 crore comprising 2% of total revenues.

At operating level, ITeS registered 27% growth in PBIT to Rs 19.29 crore (25% of total PBIT). PBIT of E&T which contributes 2% to total PBIT decreased by 33% to Rs 1.95 crore and SEZ PBIT increased by 37% to Rs 3.97 crore (5% of total PBIT) and margins declined from 92.87% to 59.48%.

FY2012 Performance

On the back of 45% growth in SI revenues to Rs 839.11 crore (57% of total revenues), 27% growth in ITES revenues to Rs 215.41 crore (15% of total revenues), 24% increase in CS revenues to Rs 336 crore (23% of total revenues) and 69% increase in SEZ revenues to Rs 20.76 crore (1% of total revenues), CMC registered 35% upside in consolidated revenues to Rs 1469.34 crore for the financial year ended March 2012.

Operating margins worsened by 410bps at 15.3% on the back of higher sub contracting and material costs despite lower staff costs. As % of sales, material costs were up 42bps to 11.62% and sub contracting costs were up 617 bps to 30.36% although staff costs declined by 187bps to 29.96% of sales. The resultant operating profits were up only 6% to Rs 224.32 crore. Other income grew 48% to Rs 17.46 crore. Interest expenses fell by 93% to Rs 1.54 lakh, but on a lower base. Depreciation charge increased by 104% to Rs 21.37 crore. The resultant PBT was up 4% to Rs 220.4 crore.

Tax provisioning increased 112% to Rs 68.59 crore with effective tax rate up from 15.3% to 31.12%. The resultant consolidated PAT of the company thus de-grew 15% to Rs 151.81 crore and PAT margin was down by 621bps to 10.33%.

PBIT margins for CS business worsened by 115bps to 7.09%, of SI business by 798bps to 22.56%, of ITES business fell 501bps to 29.93% whereas that of E&T 746bps to 13.17%.

R Ramanan, CEO and MD

The Company has accelerated its growth momentum during the year in difficult business environment in both Domestic and International markets. The Company continues to focus on value adding solutions and services in line with its stated business strategies. The Company has seen early success in its efforts to penetrate in new geographies, particularly Middle East and Africa.

Valuation

Shares of CMC were trading at Rs 980 on 19^th April 2012.

CMC : Consolidated Results

CMC : Consolidated Segmental financials