India's Tata Consultancy Services profit rises on U.S. demand

Reuters News
Posted: Jul 18, 2013 10:55 AM
India's Tata Consultancy Services profit rises on U.S. demand

By Harichandan Arakali and Aradhana Aravindan

BANGALORE/MUMBAI (Reuters) - Tata Consultancy Services, India's largest software services exporter, posted a 17 percent rise in quarterly profit and maintained an upbeat outlook, fuelled by demand from the United States.

TCS's results, driven by its highest sales volume growth in seven quarters, reinforce expectations that Indian IT vendors will be helped by the strongest demand from U.S. businesses since the end of the 2008-9 financial crisis.

The United States is the biggest market for India's $108 billion IT sector.

"Our pipeline is very very good, not only in the U.S. but also elsewhere," Chief Executive N Chandrasekaran told reporters after the company released results for its financial first quarter.

TCS, part of the salt-to-steel Tata conglomerate, India's biggest business house, does not give a revenue forecast, but Chandrasekaran maintained his earlier view that the company will grow faster than the industry.

That is typically taken to mean the industry lobby group National Association of Software and Services Companies' outlook for exports growth, pegged at a 12-14 percent this financial year.

Consolidated net profit for the quarter ended June 30 rose to 38.31 billion rupees ($642 million) from 32.8 billion rupees a year earlier. That topped the 37.8 billion rupees average of 24 analyst estimates, according to Thomson Reuters I/B/E/S.

"I think demand should get a little bit better from here onwards. If the U.S. economy is moving in the right direction in its own growth, then it definitely aids the Indian providers," said Kuldeep Koul, an analyst at ICICI Securities.

Sales rose 21 percent over the year-earlier period to 179.9 billion rupees and operating margins rose 50 basis points over the previous quarter to 26.9 percent.

The U.S. outlook for Indian IT outsourcers is clouded by pending immigration legislation that could make it more difficult and expensive to send workers there on temporary visas, a important element of the industry's business model.

Last week, rival Infosys posted-better-than expected results. Bangalore-based Infosys, which had lost ground to TCS in recent quarters, was cautiously optimistic about client spending on its services after beating profit estimates and retaining its sales forecast for the year ending in March.

TCS, whose customers include Citigroup, BP PLC, and AstraZeneca PLC, announced its results after the Mumbai markets closed. Its shares were down about 1 percent compared with a 1 percent gain in the overall index.

($1 = 59.68 rupees)

(Editing by Tony Munroe and Erica Billingham)