UPDATE 1-India's Tata Consultancy sees stronger sales growth this year

Wed Apr 16, 2014 11:37am EDT

Related Topics

* Expects sales growth in year just started to be better than last

* Expects India business to remain sluggish due to elections

* Announces 10 pct wage hike for India staff, higher than rival Infosys (Adds further details, comments from management and analyst)

By Aradhana Aravindan and Nivedita Bhattacharjee

MUMBAI, April 16 (Reuters) - Tata Consultancy Services Ltd , India's largest IT services exporter, expects a further rise in revenue growth in the new financial year, it said on Wednesday, after reporting a better than expected 51.5 percent increase in the last three months.

Over the last two years TCS has been increasing its profits at a faster pace than local rivals Infosys Ltd and Wipro Ltd, which have been distracted by management revamps and strategy changes.

"Overall, if you look at what clients are telling us, you look at the deal pipeline, deal closures, order book and the sentiment ... we believe that FY15 will be a stronger year than FY14," Chief Executive N. Chandrasekaran told reporters.

TCS, which posted a near 30 percent rise in revenue in the last fiscal year that ended on March 31, is betting on higher IT spending by its clients in financial services, retail and life sciences sectors to boost growth, he said.

Exports by India's IT outsourcing sector are expected to rise 13-15 percent in the current fiscal year, according to the National Association of Software and Services Companies, as an improving global economy encourages banks and companies to boost spending on technology.

Net profit for TCS, which counts British insurer Aviva Plc and BT Group Plc among its clients, in the fourth quarter ended March 31 rose to 52.97 billion rupees ($879 million) from 34.97 billion rupees in the same period a year ago.

That compares with the average forecast of 51.98 billion rupees given by 23 analysts, according to Thomson Reuters I/B/E/S Estimates.

Revenue in the last quarter rose 31 percent to 215.51 billion rupees, said TCS, part of the diversified Tata conglomerate, said in a statement on Wednesday.

Shares in TCS closed down 2.5 percent at 2,196.30 rupees on Wednesday before the results were released.

HIGHER WAGES

The company also said employees in India would see average pay rises of 10 percent and that it plans to recruit 55,000 staff this fiscal year, after raising its headcount by almost 9 percent last year. It employed 300,464 employees at the end of March.

"TCS already has low attrition rates, and the 10 percent wage hike could create pressure on rivals like Infosys. I think Infosys could have to follow up with interim hikes," said Ravi Menon, IT analyst with Centrum Broking.

TCS said its annualised staff turnover rate at the end of March was 11.3 percent, which compares with an all-time high of 18.7 percent at Infosys, according to figures reported on Tuesday. Infosys has raised wages for its Indiam employees by 6-7 percent.

TCS, which gets more than three quarters of its revenue from the United States and Europe, said the outlook for its business in India would stay soft for some time, as the current general election has delayed closing some deals.

On Tuesday, Infosys, India's second largest IT services exporter, reported a 25 percent increase in quarterly net profit. Third-ranked Wipro is expected to post a rise of about 22 percent in its profits when it reports results on Thursday.

($1 = 60.2400 Indian Rupees) (Editing by Sumeet Chatterjee and Greg Mahlich)

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