| TCS says decline in demand from clients is ending | |
| Bloomberg / July 19, 2009, 0:52 IST | |
Tata Consultancy Services Ltd, India’s largest software services provider, is seeing an end to the decline in demand from its biggest clients, Chief Financial Officer Seturaman Mahalingam said.
“The decline has been arrested,” Mahalingam, whose clients have had budgets cut by as much as 20 per cent this year, said in an interview in Mumbai today. “The companies are in a stage where they have been able to justify the minimum program. As the economic climate improves, their intention may be to demand a higher budget.”
Chief Executive Officer Subramanian Ramadorai froze pay, capped hiring and cut costs to beat the recession. An unexpected stability in the volume of billed hours among financial clients also helped Tata Consultancy beat earnings expectations yesterday, joining nearest rival Infosys Technologies Ltd.
Net income rose 23 per cent to Rs 15.2 billion ($312 million) in the three months ended June 30. That compared with Rs 13.6 billion, the highest of the 21 estimates compiled by Bloomberg.
Sales rose to Rs 72.1 billion, beating the median analyst estimate of 69.2 billion rupees, after Tata Consultancy won eight large deals, including five from companies in the US Revenue in US dollar terms increased 3.3 per cent over the previous quarter. Tata Consultancy, which provides computer services and back-office support to Citigroup Inc, Volkswagen AG and other customers, said it won a multimillion-dollar order from a specialty retailer in the US, where it gets half its sales. The Indian company also signed a multiyear contract with an Australian energy retailer for managing software applications.
“The earlier downcast feeling, that is gone,” Mahalingam said.
Top 10 Clients
The share of revenue from Tata Consultancy’s 10 biggest customers rose to 28 per cent in the quarter from 26.9 per cent in the preceding three months, the company said in a presentation to analysts that was posted on its website.
The proportion of revenue accounted for by sales in the home market rose to 9.1 per cent from 8.2 per cent in the previous quarter. Tata Consultancy aims to double sales in India to $1 billion in the next three years, Chief Operating Officer Natarajan Chandrasekaran said in April. The company expects to increase sales of business support services to $3 billion annually in five years, he said on Saturday.
Infosys last week reported profit for the quarter ended June 30 rose 18 per cent to Rs 15.3 billion, beating analysts’ estimates, after it trimmed costs and won orders, including two from Fortune 500 companies.
“The global economy across countries continues to be weak,” Ramadorai said on Friday. “We are certainly watchful of the situation and we don’t rule out the fact that more surprises can be expected.”
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