Results for Quarter I FY 2006-07 - tcs.com

© Tata Consultancy Services ltd. 18 July 2006 1

Results for Quarter I FY 2006-07

2

Disclaimer

Certain statements in this release concerning our future growth prospects are forward- looking statements, which involve a number of risks, and uncertainties that could cause actual results to differ materially from those in such forward-looking statements. The risks and uncertainties relating to these statements include, but are not limited to, risks and uncertainties regarding fluctuations in earnings, our ability to manage growth, intense competition in IT services including those factors which may affect our cost advantage, wage increases, our ability to attract and retain highly skilled professionals, time and cost overruns on fixed- price, fixed-time frame contracts, client concentration, restrictions on immigration, our ability to manage our international operations, reduced demand for technology in our key focus areas, disruptions in telecommunication networks, our ability to successfully complete and integrate potential acquisitions, liability for damages on our service contracts, the success of the companies in which TCS has made strategic investments, withdrawal of governmental fiscal incentives, political instability, legal restrictions on raising capital or acquiring companies outside India, and unauthorized use of our intellectual property and general economic conditions affecting our industry. TCS may, from time to time, make additional written and oral forward looking statements, including our reports to shareholders. The Company does not undertake to update any forward-looking statement that may be made from time to time by or on behalf of the company.

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Highlights Robust revenue growth across geographies and verticals. All large deals signed during last year are ramping up as per plan.

Financial Services, Retail and Telecom sectors see greater momentum

New services like Assurance, Infrastructure Support, Business Intelligence and Consulting are driving growth with large accounts.

TCS’ Global Network Delivery Model continues to be adopted by more clients and the centers outside India are beginning to offer broader portfolio of services. Example, Infrastructure Services from Hungary.

We added a total of 7,095 (net: 4,698) associates during the quarter.

Very strong demand environment


Financial PerformanceAdult Literacy Programme

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Indian GAAP Growth SummaryQ4 FY06 Q1 FY06

Income from IT & Consultancy Services 3,987 3,472 2,684

% Growth Q-o-Q 14.81%% Growth Y-o-Y 48.53%

Total Income 4,227 3,709 2,890


PBIDT (before Other Income) 1,070 992 817


Profit After Tax 883 832 654


Consolidated Indian GAAP (Rs. Crores) Q1 FY07

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Indian GAAP Income Statement – ConsolidatedConsolidated Indian GAAP

INCOMEa) IT & Consultancy Services 3,986.54 3,472.21 2,683.99 94.31 93.61 92.87 b) Manufacturing, Sale of equipment and Licences 240.65 237.00 206.02 5.69 6.39 7.13 Total Income 4,227.19 3,709.21 2,890.01 100.00 100.00 100.00

EXPENDITURE a ) Salaries & Wages 1,753.11 1,429.54 723.38 41.47 38.54 25.03 b ) Overseas business expenditure 361.32 310.84 707.89 8.55 8.38 24.49 c) Other operating expenses 1,042.52 976.75 641.59 24.66 26.33 22.20 Total Expenditure 3,156.95 2,717.13 2,072.86 74.68 73.25 71.72

Profit Before Interest, Depreciation, Taxes & Other Income 1,070.24 992.08 817.15 25.32 26.75 28.28

Interest 1.56 2.76 1.73 0.04 0.07 0.06 Depreciation 88.23 83.86 57.18 2.09 2.26 1.98 Profit Before Taxes & Other Income 980.45 905.46 758.24 23.19 24.42 26.24

Other Income 31.00 28.89 45.15 0.73 0.78 1.56 Profit Before Taxes 1,011.45 934.35 803.39 23.92 25.20 27.80 PROVISION FOR TAXES

a) Current tax expense 125.34 66.29 170.49 2.97 1.79 5.90 b) Deferred tax expense (4.11) 26.21 (31.65) (0.10) 0.71 (1.10)

Profit After Taxes From Operations 890.22 841.85 664.55 21.05 22.70 23.00 Minority Interest (7.68) (9.80) (9.51) (0.18) (0.26) (0.33) Share of profit in respect of investments in Associates 0.12 0.07 (1.19) 0.00 0.00 (0.04)

Net Profit 882.66 832.12 653.85 20.87 22.44 22.63

Q1 FY07 Q1 FY07Q1 FY06Q4 FY06 Q4 FY06 Q1 FY06Rs. Crores % of Revenue

* Q1 FY06 numbers have been recast to reflect the merger of Tata Infotech Ltd.

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Indian GAAP Income Statement – UnconsolidatedUnconsolidated Indian GAAP

INCOMEa) IT & Consultancy Services 3,271.30 2,926.02 2,370.67 95.26 95.36 95.87 b) Manufacturing, Sale of equipment and licences 162.94 142.37 102.04 4.74 4.64 4.13 Total Income 3,434.24 3,068.39 2,472.71 100.00 100.00 100.00

EXPENDITURE a ) Salaries & Wages 1,429.75 1,233.21 561.41 41.63 40.19 22.70 b ) Overseas business expenditure 329.69 285.08 681.21 9.60 9.29 27.56 c) Other operating expenses 761.57 682.15 497.81 22.18 22.23 20.13

Total Expenditure 2,521.01 2,200.44 1,740.43 73.41 71.71 70.39 Profit Before Interest, Depreciation, Taxes & Other Income 913.23 867.95 732.28 26.59 28.29 29.61

Interest 0.09 1.22 0.58 0.00 0.04 0.02 Depreciation 68.70 75.41 52.00 2.00 2.46 2.10 Profit Before Taxes & Other Income 844.44 791.32 679.70 24.59 25.79 27.49

Other Income 31.66 8.79 30.10 0.92 0.29 1.22 Profit Before Taxes 876.10 800.11 709.80 25.51 26.08 28.71 PROVISION FOR TAXES

a) Current tax expense 78.19 19.89 133.31 2.28 0.65 5.39 b) Deferred tax expense 1.22 30.16 (32.07) 0.03 0.98 (1.29)

Net Profit 796.69 750.06 608.56 23.20 24.45 24.61

Q4 FY06 Q1 FY06Q1 FY07 Q1 FY07Q1 FY06Q4 FY06Rs. Crores % of Revenue

* Q1 FY06 Numbers have been recast to reflect the merger of Tata Infotech Ltd.

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Indian GAAP Balance Sheet - ConsolidatedConsolidated Indian GAAP

30-Jun-06 31-Mar-06 30-Jun-06 31-Mar-06Source of FundsShareholders' Funds 6,628.34 5,998.81 95.80 95.16 Minority Interest 155.64 164.72 2.25 2.61 Loan Funds 134.42 116.69 1.94 1.86 Deferred Tax Liability 0.38 23.57 0.01 0.37 Total Liabilities 6,918.78 6,303.79 100.00 100.00 Application of FundsFixed Assets (net) 2,234.09 1,998.09 32.29 31.70 Goodwill 745.60 733.90 10.78 11.64 Investments 803.22 704.62 11.61 11.18

Cash and Bank Balance 484.05 432.38 7.00 6.86 Current Assets, Loans and Advances 5,446.21 4,732.90 78.72 75.08 Current Liabilities and Provisions 2,794.39 2,298.10 40.39 36.46

Net Current Assets 3,135.87 2,867.18 45.32 45.48 Total Assets 6,918.78 6,303.79 100.00 100.00

Rs Crores %

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US GAAP Revenue Growth

Q4 FY06 Q1 FY06

Revenue from International Business 37,059 32,960 25,261


Revenue from Indian Business 4,384 4,273 3,867


Total Revenue 41,443 37,234 29,129


Consolidated US GAAP (Rs Million) Q1 FY07

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US GAAP Growth Summary

Q4 FY06 Q1 FY06

Gross Margin 17,872 16,757 13,728


Operating Income 9,265 8,965 7,732


Net Income 8,626 7,958 6,472


Consolidated US GAAP (Rs Million) Q1 FY07

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US GAAP Income StatementConsolidated US GAAP USD Million

Revenue 900.16 41,443.32 37,233.69 29,128.71 100.00 100.00 100.00 Cost of revenue 511.97 23,570.98 20,477.16 15,400.39 56.88 55.00 52.87

Gross margin 388.19 17,872.34 16,756.53 13,728.32 43.12 45.00 47.13 SG & A expenses 186.96 8,607.78 7,791.59 5,996.20 20.77 20.93 20.59

Operating income 201.23 9,264.56 8,964.94 7,732.12 22.35 24.07 26.54 Other income (expense), net 14.50 667.72 (39.92) 136.82 1.61 (0.11) 0.47

Income before income taxes 215.73 9,932.28 8,925.02 7,868.94 23.96 23.96 27.01 Income taxes 26.88 1,237.56 897.62 1,302.57 2.99 2.41 4.47 Equity in net earnings of affiliates 0.34 15.53 33.00 (9.36) 0.04 0.09 (0.03)

Income after income taxes 189.19 8,710.25 8,060.40 6,557.01 21.01 21.64 22.51 Minority Interest 1.84 84.56 102.61 85.30 0.20 0.28 0.29

Net Income 187.35 8,625.69 7,957.79 6,471.71 20.81 21.36 22.22 USD Rupees Rupees Rupees

Earnings Per Share 0.38 17.63 16.26 13.23

Q4 FY06 Q1 FY06Rs Million % of Revenue

Q1 FY06Q4 FY06Q1 FY07 Q1 FY07 Q1 FY07

INR numbers of Q1 FY07 are converted to USD on convenience translation basis @ Rupees 46.04 per USD

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COR – SG&A Details

COR

Employee Cost 18,772.19 16,453.97 11,657.09 45.30 44.19 40.02 Equipment & Software 1,884.15 1,866.35 1,799.52 4.55 5.01 6.18 Depreciation 499.67 579.71 409.97 1.21 1.56 1.41 Travel 546.62 496.42 632.44 1.32 1.33 2.17 Communication 363.78 344.75 233.77 0.88 0.93 0.80 Other Costs 1,504.58 735.95 667.60 3.63 1.98 2.29

Cost of Revenue 23,570.99 20,477.15 15,400.39 56.89 55.00 52.87

S G & A

Employee Cost 4,215.69 3,612.84 2,955.36 10.17 9.70 10.15 Bad Debts & Prov for Doubtful Debts 221.45 113.53 97.49 0.53 0.30 0.33 Depreciation 251.40 285.05 172.05 0.61 0.77 0.59 Rent 756.09 669.11 406.93 1.82 1.80 1.40 Travel 664.75 602.00 487.14 1.60 1.62 1.67 Communication 257.86 221.53 217.11 0.62 0.59 0.75 Recruitment & Training 232.98 232.90 123.30 0.56 0.63 0.42 Professional Fees 405.88 389.77 228.30 0.98 1.05 0.78 Other Costs 1,512.86 1,551.42 1,215.39 3.65 4.17 4.17

Research and development 88.83 113.44 93.13 0.21 0.30 0.32

S G & A expenses 8,607.79 7,791.59 5,996.20 20.75 20.93 20.58

Q4 FY06 Q4 FY06

Q1 FY06

Q1 FY07 Q1 FY06

Q4 FY06 Q4 FY06Rs. Millions

Q1 FY07 Q1 FY06 Q1 FY07% of Revenue

Q1 FY07 Q1 FY06Rs. Millions % of Revenue

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US GAAP Balance SheetConsolidated US GAAP

Rs Milliion % Rs Milliion %AssetsCash and Cash equivalents 4,664.16 4.86 3,965.01 4.63 Accounts Receivable 35,241.34 36.70 32,789.78 38.29 Unbilled Revenues 7,161.88 7.45 4,712.30 5.50 Other Current assets 9,446.15 9.84 8,133.15 9.50 Property & Equipment 16,710.64 17.40 15,071.53 17.60 Intangible assets and Goodwill 9,299.98 9.68 8,692.06 10.15 Investments 8,236.42 8.58 7,274.09 8.50 Other Non Current assets 5,276.50 5.49 4,988.12 5.83 Total assets 96,037.07 100.00 85,626.04 100.00 Liabilities and Shareholder's EquityCurrent liabilities 25,844.00 26.92 22,726.39 26.54 Short term borrowings 1,184.03 1.23 979.35 1.14 Minority Interest 1,607.60 1.67 1,563.68 1.83 Other non-current liabilities 2,006.35 2.09 1,948.79 2.28 Shareholders Funds 65,395.09 68.09 58,407.83 68.21 Total Liabilities 96,037.07 100.00 85,626.04 100.00

30-Jun-06 31-Mar-06


Operational PerformanceTCS IT WIZ

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Growth by Market

Americas 53.2 55.1 UK 19.9 16.9 Europe 7.8 7.4 India 10.6 11.5 Asia Pacific 3.9 4.0 Ibero America 2.9 2.9 MEA 1.7 2.2

100.0 100.0

Geography % Q1 FY07 Q4 FY06

19.9%

7.8%

10.6%

3.9%2.9%1.7%

53.2%

Americas

UK

Europe

India

Asia Pacific

Ibero America

MEA

TCS experienced growth in all geographies during the quarter.

All large deals announced during last fiscal have started ramping up.

Excellent momentum in Europe in Telecom, Financial Services verticals, Enterprise Solutions and BPO.

In North America, growth is led by expansion of services among our large customers. TCS also picked important wins in the Retail, Infrastructure and BPO segments.

In Iberoamerica, the ramp-up for ABN AMRO and other wins announced last quarter are as per plan.

Overall, the deal pipeline is very healthy and there is a significant growth momentum.

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Growth by Domain

BFSI 41.2 41.8 Manufacturing 16.0 16.4 Telecom 16.5 14.3 Life Sciences & Healthcare 4.1 4.5 Retail & Distribution 6.7 6.4 Transportation 3.6 3.7 Energy & Utilities 2.6 3.0 Others 9.3 9.9

Total 100.0 100.0

IP Revenue (%) Q1 FY07 Q4 FY06

16.0%

%

2.6%9.3%

41.2%BFSI

Manufacturing

Telecom

Life Sciences & Healthcare

Retail & Distribution

Transportation

Energy & Utilities

Others

Telecom sector achieved excellent growth in Europe, Middle East and Asia. TCS is engaged in a number of SI engagements for GSM/ 3G OSS implementations and CRM Solutions across markets.

Excellent growth with many of the large BFSI customers through expansion of services like Consulting, Business Intelligence and Assurance Services.

Three of our existing large Retail customers are growing by engaging TCS in new areas like BPO, Assurance and Infrastructure Services. TCS landed with a large $50m engagement with a leading North American retailer for building the next generation solutions.

Good pipeline of opportunities in Pharmaand Utility segments.

16.5

4.1%

6.7%

3.6%

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Growth by Service Line

SP Revenue % Q1 FY07 Q4 FY06

Application Development & Maint. 68.9 69.3 Enterprise Solutions 25.3 24.5 Asset Leveraged Solutions 2.3 2.6 Others 3.5 3.6

Total 100.0 100.0

All new service areas like Global Consulting, Infrastructure and Assurance services are driving growth in existing large accounts.

In the BPO segment, the Pearl deal has become operational and the revenues have started flowing in. In addition, TCS landed with very important wins in F&A and Clinical data management during Q1.

TCS’ remote infrastructure services offering using the Global Infrastructure Command Centre is gaining tremendous traction. The number of wins as well as the size of engagements are increasing.

68.9%

25.3%

2.3%3.5%

Application Development & Maint.Enterprise Solutions Asset Leveraged Solutions Others

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Operational ParametersThe Global Network Delivery Model

continue attract customers and 4 new customers started to leverage TCS’GDCs in China, Hungary, Uruguay and Brazil during this quarter.

The offshore leverage remains a key focus and existing accounts are moving work offshore as per plan.

The large outsourcing deals signed during the previous quarter have increased the Time & Material component significantly during this quarter.

Q4 FY06

Onsite 58.7 59.0 GDC/RDC 3.2 3.7 Offshore 38.1 37.3

Time & Material 56.4 51.7Fixed Price & Time 43.6 48.3

* Excluding Domestic Clients

Contract Type

Revenue %

Delivery Location*

Q1 FY07

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Client ParametersClient Concentration

Q1 FY07 Q4 FY06Clients Contribution *Revenue %Top 1 4.0 3.7Top 5 16.7 17.0Top 10 26.8 27.5

US$ 1 mln Clients 258 256US$ 5 mln Clients 97 96US$ 10 mln Clients 65 54US$ 20 mln Clients 33 31US$ 50 mln Clients 10 9

* Last Twelve Months

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Client Acquisition and Expansion

Particulars Q1 FY07 Q4 FY06

Active Clients 764 748

New Clients 62 89

Revenue % from Repeat Business 98.8 91.9

Revenue % from New Business 1.2 8.1

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Client and Delivery Highlights• TCS helped a Fortune 500 energy company to streamline and integrate

its operations in four acquisitions in China through successful implementation of an Enterprise Solution.

• TCS successfully rolled out Siebel-based Global Sales and Campaign Management solution for one of the largest shipping companies in the world.

• TCS delivered a web-based application using Service Oriented Architecture (SOA) for testing and registration system for a public sector transport body in Europe. The solution reduced operational costs and errors and improved customer service by streamlining workflow and better integrating IT with business goals.

• TCS carried out a Customer transformation engagement for a leading water management company in Europe and helped it achieve over 30% savings in servicing its customers.

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Representative Wins • A large North American retailer selected TCS as a strategic partner for

developing their next generation business critical applications. The deal is worth over US $50 million.

• A leading European telecommunication operator has selected TCS as its Test Strategy partner for the roll out of its next generation network.

• TCS has won a 600 person year engagement to provide the Recovery and Resolution Support for Cards, Deposits and Customer Information Systems for a major North American Bank.

• A leading telecommunication service provider in the Middle East engaged TCS to provide an end-to-end CRM solution for its wireless network comprising GSM & 3G services. The deal is worth US $33 million.

• TCS has been engaged by a major healthcare service provider in Asia Pacific for developing a fully integrated healthcare solution.


Profiles of ‘Select’ Growth Engines

Blood Donation Camp -China

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BPOTCS BPO continues to grow strongly across all its operating units adding 6 new clients in Q1.

Key Engagements

A major US-based pharmaceutical company selected TCS for clinical data management, statistical analysis and medical writing services across the entire spectrum of clinical research and marketing.

A leading US office products manufacturer selected TCS to end-to-end F&A BPO services. TCS will re-architect their process for increased efficiency, SOX compliance and support continuous improvement.

In a leveraged IT and BPO deal, TCS has been selected by Santiago city’s public transport authority to build and manage communications, customer care, operational support and information systems for their new integrated public transportation system.

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Engineering & Industrial ServicesTCS witnessed steady growth in EIS with the addition of 23 overseas clients.

TCS was awarded the Frost & Sullivan Best Company Award for its services in Manufacturing space in the area of engineering and industrial services

Key Engagements

TCS successfully completed a multi-million dollar turnkey project in the area of Removal of Hazardous Substance (RoHS) for a global telecom major in North America

TCS is executing an adaptive manufacturing proof of concept engagement for a leading mining company in APAC

A British Aerospace major has engaged TCS for design of braking systems.

TCS successfully implemented MFG-PRO suite for an Indian steel major within a span of 9 months

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IT Infrastructure ServicesTCS differentiated offerings in IT Infrastructure Services continue to attract strong traction from clients.

In Q1, TCS added 12 new IT IS customers.

Key Engagements

For a leading North American retailer TCS leveraged its Global Infrastructure Command Center to provide remote server management, helpdesk and desktop solutions with a 100% offshore delivery model.

A leading global pharmaceutical company engaged TCS to “virtualize” their server environment and optimize enterprise infrastructure and reduce server foot-print.

TCS is providing application monitoring and support, shared engineering services, and network management services remotely for a large banking and financial services major in North America.

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Assurance Services

Assurance services enjoyed good growth momentum, adding 6 new clients in Q1.

TCS provided test strategy consulting to 5 clients in Q1 and has setup testing center of excellence for 28 clients

Key Engagements

A leading European telecommunication operator has selected TCS as its Test Strategy partner for the roll out of its next generation network.

For a major financial services company in NA, TCS is involved in doing Test Process Assessment across different divisions and providing the road map for improving overall testing efficiency.

TCS helped an large insurance major in North America develop an enterprise wide operational model, test process methodology, and road map for reducing overall cost of testing.

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Global Consulting PracticeGCP has registered strong growth adding 36 new customers

GCP won 106 new engagements in Q1 and executed 124 engagements

Key Engagements

GCP helped a leading European depository evolve into a Service Oriented enterprise and thereby enhance business agility and drive revenue enhancement.

For a North American Food giant facing high procurement costs, GCP delivered an innovative multi-country sourcing approach that can deliver up to US$35 million annual savings and guaranteed year round raw materials supply.

For a large UK Insurer, TCS delivered an improvement solution leveraging the best practices of CMMi, ITIL and COBIT frameworks leading to improved delivery quality and a strong alignment of IT with the business using a Balanced Scorecard approach


Human Resources

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3,455

3,648

67,530

62,832

48,337

3,660

Q1-06 Q4-06 Q1-07

Associates in TCS Ltd Associates in Indian Subsidiaries

Total Associate Base: 71,190No. of TCS Associates: 67,530 (including 4,514 in Corporate Functions)

No. of Associates in Overseas Subsidiaries and Branches: 4,746

No. of Associates with Indian subsidiaries (CMC and WTI): 3,660

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7,0955,954

8,814

4,271

7,345

4,698

Q1 06 Q4 06 Q1 07

Gross AdditionsNet Additions

Additions- Gross 7,095 & Net 4,698 Associates

In Q1-FY07, we added 2,574 Trainees and 2,703 Experienced Professionals

1,818 Associates added in Overseas Subsidiaries and Branches

We added a net of 3,761 people through recruitment and absorbed 937 people in Diligenta

Utilisation Rate in Q1-FY07 was 80.13% (excluding trainees), 77.33% (including trainees)

In TCS, our attrition rate for the Last Twelve Months (LTM) was 10.6%

We visited 180 campuses in Q1-FY07 and had the Day-1 slot at 94% of the campuses. We made a total of 8,710 trainee offers to people who will join us in FY08.

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Truly Global WorkforceNo. of Associates in Global / Regional Delivery Centers was 2,489

Non-Indian nationals was 7.3%

Associates from across 53 nationalities

25% of our workforce comprises women

50% of our associates have more than 3 years of work experience

Brazilian, 16%

British, 19%Chilean, 23%

Uruguayan, 9%

Chinese, 7%

Others, 11%Australian,

4%American,

11%

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Thank You!

Results for Quarter I FY 2006-07 - tcs.com

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