Tata Consultancy Profit Falls After Payout to Workers

Tata Consultancy Services Ltd. posted a decline in fourth-quarter profit after the company announced a one-time bonus to its employees.

Net income fell to 38.6 billion rupees ($620 million) in the three months ended March from 53 billion rupees a year earlier. Sales at India’s largest software-services company rose to 242.2 billion rupees, missing the 245.4 billion-rupee median of 31 analysts’ estimates.

Revenue fell short of analysts’ projections for the third consecutive quarter amid weak demand from clients in the insurance and energy sectors. Worldwide spending on information-technology services is projected to shrink 0.7 percent this year, led by cuts at U.S. companies, researcher Gartner Inc. forecast on April 9.

“Their clients are not spending as much and the opportunities are shrinking in value because of the increase in automation,” said Girish Pai, an analyst at Nirmal Bang Institutional Equities in Mumbai. “The market is going to be disappointed with the pace of growth that the industry is going to display for the next two to three years, including TCS.”

Tata Consultancy announced a 26.3 billion-rupee bonus for its workers as a special reward to mark 10 years since listing, the Mumbai-based company said in a statement.

Excluding a charge linked to the one-time payout, profit was 59.1 billion rupees. Net income was projected at 53.9 billion rupees according to the median of 30 analysts’ estimates compiled by Bloomberg.

‘Strong Headwind’

“We had a strong headwind in the energy sector because of the oil situation and huge volatility which affected the telecom sector,” Chief Executive Officer N. Chandrasekaran told reporters at a press conference on Thursday. “And we had headwinds in Diligenta, our insurance platform.”

Shares of Tata Consultancy fell 1.7 percent to 2,582.80 rupees at the close in Mumbai trading, before the announcement. The benchmark S&P BSE Sensex Index declined 0.5 percent.

Tata Consultancy said among the orders it won last quarter were contracts from a large European bank, a telecommunications provider in the Middle East and a North American insurance company. Four of the new clients would contribute revenue of more than $100 million each, the company said.

The company “had very strong client additions across all segments,” Chandrasekaran said today. “As we look into the future, our deal wins, our order book and the client sentiment all look positive and we feel confident.”

Infosys Ltd., Tata Consultancy’s nearest Indian competitor, is scheduled to report earnings on April 24.

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