TCS profit up sharply on outsourcing demand

Posted a 44% rise in quarterly profit helped by overseas customers

Tata Consultancy Services Ltd (TCS) , India's largest software services exporter, posted a 44 percent rise in quarterly profit helped by overseas customers buying more of its outsourcing services to cut costs.

TCS, which provides information technology and back-office services, is benefiting from a wave of cost-cutting by companies around the world. It is part of India's $100 billion-a-year IT services sector, which earns some three-quarters of its revenue from exports to the United States and Europe.

"We have done very well, and we look optimistic," Chief Executive N. Chandrasekaran told reporters on Friday.

He also noted the return of some discretionary spending, which is typically for longer-term projects by clients and is an indicator of the health of the industry.

Chandrasekaran said it would be difficult to push prices higher in the current global economic environment but the outlook for prices was stable at least for the rest of the current fiscal year.

"A strong set of numbers from TCS. Better than expected revenues, broadly stable pricing and broad based nature of growth were the key highlights," said Kuldeep Koul, analyst at ICICI Securities in Mumbai. "Margins were a tad light," he said, but this was mostly due to an increase in work done overseas at client sites.

Fierce competition and rising operating costs have eroded the bottom line of some Indian IT services firms, including second-ranked Infosys Ltd .

Last week, Infosys reported weaker-than-expected margins for the quarter ended September 30. The former bellwether for India's IT sector also disappointed investors hoping for a more robust growth outlook.

By contrast, smaller rival HCL Technologies Ltd on Wednesday reported a 78 percent jump in quarterly profit after securing large overseas contracts.

TCS's net profit for the three months ended September rose to 35.12 billion rupees from 24.39 billion rupees a year earlier, TCS said. Analysts had forecast a profit of 33.34 billion rupees, according to Thomson Reuters estimates.

"If you look at the markets, we've grown in every market," Chandrasekaran said. All lines of services grew, he said, including the key financial services, which contributed 42.8 percent of the company's revenues in the September quarter.

He said there was a pickup in discretionary spending in areas that included data analytics, solutions for helping customers become more mobile, and cloud computing services.

The company does not provide detailed forecasts, but has said it expects to beat the industry export revenue growth forecast of 11-14 percent this fiscal year set by trade body National Association of Software and Service Companies or NASSCOM.

"We've said that we'll be ahead of NASSCOM, we'll be delivering on that and we're on course," Chandrasekaran said.

TCS, part of the Tata Group industrial conglomerate, serves customers including Citigroup Inc and BP Plc .