India's TCS profit up 22 percent, expects revenue to outpace sector

MUMBAI Wed Apr 17, 2013 8:46am EDT

An employee of Tata Consultancy Services (TCS) works inside the company headquarters in Mumbai March 14, 2013. REUTERS/Danish Siddiqui

An employee of Tata Consultancy Services (TCS) works inside the company headquarters in Mumbai March 14, 2013.

Credit: Reuters/Danish Siddiqui

MUMBAI (Reuters) - Tata Consultancy Services Ltd (TCS.NS), India's top software services provider, matched estimates with a 22 percent rise in quarterly profit and said it expects to grow revenue faster than a key industry-wide forecast for the year starting this month.

Net profit for the fiscal fourth quarter ended March 31 rose to 35.97 billion rupees ($663.35 million) from 29.46 billion rupees in the year-earlier period, as it won orders from customers including Nokia (NOK1V.HE) and BNP Paribas (BNPP.PA).

That was roughly in line with an average earnings estimate of 36.2 billion rupees among 20 analysts polled by Thomson Reuters I/B/E/S.

It also said it expects revenue in the current fiscal year to grow in excess of the National Association of Software and Services Companies (Nasscom) forecast of 12-14 percent export growth for the sector, in constant currency terms.

By comparison, No.2 player Infosys Ltd (INFY.NS) on Friday forecast dollar revenue growth of 6-10 percent for the new fiscal year, which was lower-than-expected, disappointing investors and sending its shares down 21 percent.

Infosys has struggled to implement a strategy of generating a higher proportion of revenue from its own software platforms, and its market share has been essentially flat for the past two years. By contrast, TCS has focused on more traditional outsourcing services.

TCS grew its business volume by 4.4 percent from the previous quarter, compared with 1.8 percent growth at Infosys. During the March quarter, TCS' operating margins fell to 26.5 percent from 27.3 percent in the previous quarter and 27.7 percent in the same quarter a year earlier.

The company said it added 52 new clients in the quarter and that the pipeline of large potential deals has grown.

"We have endeavored to maintain our profitability despite stiff headwinds and increased volatility through the year," Rajesh Gopinathan, chief financial officer, said in the earnings statement, released after the close of markets in India.

Sector investors have been rattled by Infosys' guidance, pending U.S. legislation that would make it more expensive to send workers there on temporary visas [ID:nL2N0D32SH], 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 .BSEIT fell 1.14 percent on Wednesday ahead of the TCS results, underperforming the broader market .BSESN, which was down 0.07 percent.

Earlier on Wednesday, fourth-ranked HCL Technologies Ltd (HCLT.NS) said its March quarter profit rose 73 percent, beating estimates, although its shares ended 1.5 percent lower after an early jump.

Third-ranked Wipro Ltd (WIPR.NS) is expected to say profits rose 14 percent when it reports earnings on Friday, according to Thomson Reuters I/B/E/S.

($1 = 54.2250 Indian rupees)

(Additional reporting and writing by Harichandan Arakali in BANGALORE; Editing by Chris Gallagher, Tony Munroe and Sumeet Chatterjee)