October 13, 2015 / 12:04 PM / in 5 years

Tata Consultancy profit meets forecasts on surge in digital deals

MUMBAI (Reuters) - Increased outsourcing of digital technology services by western companies helped Tata Consultancy Services Ltd, India’s largest software services exporter, post a 14.5 percent rise in quarterly net profit, meeting market expectations.

Tata Consultancy Services (TCS) Chief Executive N. Chandrasekaran speaks during a news conference in Mumbai, India, October 13, 2015. REUTERS/Shailesh Andrade

Worldwide IT spending is expected to exceed $3.6 trillion in 2016, a 1.5 percent rise from this year, according to research firm Gartner, driven by digital business on the back of growing use of social media and smartphones.

Tata Consultancy and rivals Infosys Ltd and Wipro Ltd have in the past year increased their focus on high-margin digital and cloud-computing services, as competition and pricing pressure on routine IT services dented growth.

Net profit at Tata Consultancy reached 60.55 billion rupees ($929 million) in the second quarter through September, against an average forecast of 60.49 billion.

Revenue from digital services, a relatively new business segment, increased to about 13 percent of the total, said Chief Executive N. Chandrasekaran, though the company did not report its share a year before.

“(It’s) fair for you to expect that all out employees will be engaged in digital over the next few years,” Chandrasekaran told a news conference. “We are very seriously investing in digital.”

Outsourcing project wins in the quarter included developing a digital banking platform for a European bank and developing a social media roadmap for a leading Middle East bank, the company said.

Betting on demand for IT services, Tata Consultancy said it planned to add 75,000 staff this fiscal year through March, on top of its existing 335,620 employees, mostly located at its facilities in India.

Tata Consultancy’s results came a day after Infosys, India’s second-largest software services exporter, trimmed its full-year dollar revenue forecast to account for strength in the U.S. currency against the rupee.

Infosys Chief Operating Officer Pravin Rao said the company would face come “headwinds” in coming months, as IT services firms compete with each other to offer low priced solutions.

Bengaluru-based Infosys’ sales growth in the latest quarter in constant currency terms, at 6.9 percent over the preceding quarter was, however, higher than Tata Consultancy’s 3.9 percent growth. Tata Consultancy did not give any forecast.

The National Association of Software and Service Companies (Nasscom) expects India’s nearly $150 billion IT services outsourcing sector to see export revenue growing by between 12 and 14 percent in the current financial year.

($1 = 65.1825 rupees)

Writing by Sumeet Chatterjee; Editing by David Holmes

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