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Tata Consultancy Services seen outpacing sector after profit spurt

Reuters
Apr 18, 2013 at 09:42am IST

Mumbai: Tata Consultancy Services (TCS), India's top software services provider, lifted quarterly profit by more than a fifth and painted a more bullish picture for future revenue growth than key rival Infosys. TCS said it expects revenue in the current fiscal year to increase more than the 12-14 per cent sector export growth forecast by the National Association of Software and Services Companies (Nasscom).

Infosys Ltd on Friday missed expectations with a forecast of 6-10 per cent growth in dollar revenue, sending its shares tumbling. Earlier on Wednesday, fourth-ranked HCL Technologies Ltd said March quarter profit rose 73 per cent, beating estimates, although its shares ended 1.5 per cent lower.

"There is a wedge forming between performers and not so good performers in the sector. Given the way the U.S. economy is recovering, this augurs well for the performers like TCS," said Anshu Kapoor, head of private wealth management at brokerage Edelweiss in Mumbai.

TCS seen outpacing sector after profit spurt

TCS said it expects revenue in the current fiscal year to increase more than the 12-14 per cent sector export growth forecast by the Nasscom.

Infosys, the No.2 player in India's $108 billion IT services industry, has struggled to implement a strategy of generating a higher proportion of revenue from its own software platforms. By contrast, TCS has focused on more traditional outsourcing. Tata's net profit for the fiscal fourth quarter ended March 31 rose 22 per cent to Rs 3597 crore from Rs 2946 crore in the year-earlier period, as it won orders from customers including Nokia and BNP Paribas.

Rattled investors

Sector investors have been rattled by Infosys' guidance, pending US legislation that would make it more expensive to send workers there on temporary visas, and a rising rupee fuelled by the global slump in commodities, which pushes down overseas revenue in local currency terms. The BSE IT services index fell 1.14 per cent on Wednesday ahead of the TCS results, underperforming the broader market, which was down 0.07 per cent.

TCS grew its business volume by 4.4 per cent from the previous quarter, compared with 1.8 per cent growth at Infosys. The company said it added 52 new clients in the quarter and that the pipeline of large potential deals has grown.

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