TCS FY13 growth to outpace industry average, says CFO

The business growth of Tata Consultancy Services (TCS), India’s largest software exporter, in the current financial year (FY13) will outpace the industry’s, according the company’s chief financial officer and executive director S Mahalingam.

“We have demonstrated strong financial performance in the first two quarters. We continue to grow in this quarter. We believe that our growth for this financial year will be better than Nasscom’s estimate,” Mahalingam told reporters. Industry body Nasscom had predicted that Indian software companies’ business growth would be about 11 per cent in FY13.

According to indications, customers are not planning to cut technology budgets, said Mahalingam. He expects clients’ IT spends to remain stable. Typically, companies finalise their annual spends on technology by the end of January. TCS also expects its margin to remain at around 27 per cent, which suggests that it is not witnessing much pressure on bill rates.

“It is our aspiration to remain at that level,” said Mahalingam. He, however, refused to offer any further guidance on the company's financial performance for the rest of the current financial year.

The software firm closed the July-September 2012 quarter with operating margin of 26.7 per cent under Indian GAAP (generally accepted accounting principles). During this period, TCS reported a net profit of Rs 3,434 crore on revenues of Rs 15,621 crore.

Mahalingam said the company may incur a foreign exchange loss of around Rs 30-35 crore in the October-December 2012 quarter due to fluctuations in the currency exchange rate. TCS has taken a plain vanilla put option to hedge itself from adverse movements in currency exchange rate.

“As far as this year is concerned, we had decided that we would protect the rate at 50, because at the beginning of the year the (rupee-dollar exchange) rate was around 49,” said Mahalingam.