Mumbai: Tata Consultancy Services Ltd (TCS), India’s largest software exporter, reported second quarter profit that beat analysts’ estimates after overseas customers outsourced more information technology (IT) contracts.
Net income rose 32% from a year earlier to Rs2,170 crore in the three months ended in September, the Mumbai-based firm said on Thursday in results based on Indian accounting norms. The average of 35 analysts’ estimates compiled by Bloomberg was profit of Rs1,990 crore.
Chief executive officer N. Chandrasekaran said the growth achieved in the past three months makes the company “positive” in its outlook for global demand. TCS joins closest rival Infosys Technologies Ltd in signalling that demand for India’s software services remains robust as companies increase their IT budgets.
“There’s a big cost-cutting drive in the West,” said Vihang Naik, an analyst at MF Global Ltd. Offshoring is one of the biggest ways to slash costs, and Indian vendors are among the beneficiaries, he said.
Sales rose 25% to Rs9,290 crore, beating analysts’ estimate for revenue of Rs8,840 crore. TCS will pay a dividend of Rs2 a share.
Profit according to the US accounting norms was Rs2,106 crore, a gain of 30%, the company said. TCS gained 2.4% to Rs986.20 at the 3.30pm close of Mumbai trading, compared with a 2% advance by the benchmark Sensitive Index. The stock has risen 33% this year, outperforming the Sensex’s 16% increase. The results were announced after the market ended trading.
“Given the growth we have achieved across all industry units, we are very positive about the global demand recovery going forward,” Chandrasekaran said in the statement. The firm is looking at 11 large deals in the third quarter, he added.
TCS said north American revenue crossed $1 billion (Rs4,440 crore) in the second quarter and the company added 19,293 employees for a total of 174,417. The company aims to add a further 20,000 employees by the end of March.
The company, which provides computer services and back-office support to clients including Citigroup Inc. and General Electric Co., saw an 11% increase in volume in the quarter. IT services firms define volume as the number of man-months workers spend on projects.
Worldwide IT spending, which includes computer equipment and software purchases, will grow 7% this year to $1.5 trillion, after falling by 8.6% last year, according to Forrester Research Inc. The US will lead the growth, spending an estimated $758 billion on IT this year.
The appreciation of the rupee is a “big headwind” in the next quarter, Chandrasekaran said in Mumbai. TCS had Rs47 crore of foreign exchange loss in the quarter.