April 17, 2013 / 11:54 AM / 7 years ago

TCS seen outpacing sector after profit spurt

MUMBAI (Reuters) - Tata Consultancy Services (TCS) (TCS.NS), 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 (INFY.NS).

A man walks out of the office of Tata Consultancy Services (TCS) in Mumbai April 17, 2013. REUTERS/Vivek Prakash

TCS said it expects revenue in the current fiscal year to increase more than the 12-14 percent 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 percent growth in dollar revenue, sending its shares tumbling.

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

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 percent to 35.97 billion rupees 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.


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, 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 percent on Wednesday ahead of the TCS results, underperforming the broader market, which was down 0.07 percent.

TCS grew its business volume by 4.4 percent from the previous quarter, compared with 1.8 percent growth at Infosys.

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

Additional reporting by Harichandan Arakali in Bangalore and Sumeet Chatterjee in Mumbai; Editing by David Cowell

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