* Q3 net profit at 53.14 bln rupees versus 51.3 bln
* Raises hiring target for FY14 by 5,000 to 55,000
* CEO says number of deals chasing now higher than last year
* Stock falls as much as 5.6 pct after sharp recent gains
By Aradhana Aravindan
MUMBAI, Jan 17 India's top IT services provider
Tata Consultancy Services Ltd (TCS) forecast faster
sales growth in the next fiscal year but failed to ease investor
worries that smaller rivals will also benefit from an
anticipated rise in client demand.
Shares in TCS fell as much as 5.6 percent on Friday, on
track for their biggest single day drop in more than 1-1/2
years, on concerns that the company will have to fight hard for
contracts in the United States and Europe, the main markets for
India's $108 billion IT services industry.
"Competition is getting fierce in the market and small
players are becoming very aggressive. TCS may see some of its
market share going to its rivals in the medium term," said Taina
Erajuuri, a Helsinki-based portfolio manager at FIM India, whose
holdings include TCS as well as rivals Infosys Ltd and
Global IT spending growth is expected to accelerate to more
than 5 percent this year after growing last year at its slowest
pace since the 2008 global financial crisis, research firm
International Data Corporation said.
TCS beat analysts' expectations and reported on Thursday a
49.6 percent quarterly profit rise, its fastest pace of increase
since mid-2011 at least.
India's second largest IT outsourcing firm Infosys last week
also reported a higher-than-expected increase in its quarterly
net profit and lifted its sales growth outlook for this fiscal
year on signs of an economic revival in the United States and
TCS shares, however, are over-valued compared to Infosys.
TCS trades at 21.2 times its forward earnings compared to 17.4
times for Infosys, according to Thomson Reuters data.
"The TCS stock was slightly overheated. Also, Infosys is
emerging as a strong alternative," said Ashish Chopra, a sector
analyst at brokerage Motilal Oswal Securities. "I don't think
there is any worry about outsourcing demand."
India's third largest software services provider Wipro Ltd
is expected to report a 16 percent increase in its
quarterly net profit on Friday.
STRONG REVENUE GROWTH IN 2014
Over the last two years, TCS has increased its sales
revenues at a faster pace than both Infosys and Wipro, which
have endured management revamps and strategy changes. TCS also
beat its rivals in winning a bigger share of lucrative financial
services outsourcing contracts.
TCS, part of the diversified Tata conglomerate, counts
British insurer Aviva Plc and BT Group Plc among
its clients. Its consolidated net profit rose to 53.14 billion
rupees ($863.29 million) for the quarter ended December from
35.52 billion a year earlier.
The profit beat the average estimate of 51.3 billion rupees,
according to a Thomson Reuters poll of 23 analysts. Revenue rose
32.5 percent in the quarter to 212.94 billion rupees and Chief
Executive N. Chandrasekaran forecast stronger growth this year.
"Based on initial discussions with our customers we believe
2014 will be a stronger year for us than 2013," Chandrasekaran
said, without giving any specific figures.
"The number of deals and the total size in terms of value of
deals that we are chasing is much higher than the same time last
year, than any of the quarters this year," he told reporters
after the earnings were announced.