Hong Kong: Tata Consultancy Services Ltd., India’s largest computer-services provider, said the rupee’s appreciation against the dollar will erode earnings as almost all of the company’s sales are generated overseas.
Rs.We’re very concerned,’’ Chief Executive Officer S. Ramadorai said in an interview today in Mumbai. Rs.The way the rupee drastically appreciated in the last couple of days is definitely of concern.’’
Tata Consultancy and local rivals including Infosys Technologies Ltd. may post slower growth in profit and sales this year as an appreciating rupee reduces the value of earnings from the US, their biggest market. Tata Consultancy will offset the fall in profitability by raising rates charged to clients for managing computer networks, Ramadorai said.
Estimates for the company’s earnings on a per-share basis for this year and the next were each reduced by 4 % today by Mitali Ghosh, Merrill Lynch’s analyst based in Mumbai. The rupee’s gains will shrink the company’s profit margins, Ghosh said. She maintained a Rs.buy’ rating on the stock.
Tata Consultancy, which gets almost 91% of its sales from overseas, has a pipeline of orders that’s Rs.fairly strong’, Ramadorai said today. The company is in talks for 10 new orders, and three to four contracts will be renewed soon.
Shares of Tata Consultancy fell 2.6% to Rs1,246.80 at 10:13 a.m. on the Bombay Stock Exchange today. The shares have risen by 2.6% this year, compared with a 0.7% decline in the benchmark Sensitive Index.
Ramadorai expects the central bank to curb gains and weaken the currency to Rs43 to Rs43.50 to a dollar in six months from 41.74.
The company yesterday reported fourth-quarter profit rose 47%, less than analysts expected, as an appreciation in the rupee eroded the value of overseas sales.
Net income climbed to Rs11.7 billion ($280 million) for the three months ended 31 March from Rs7.96 billion a year earlier, the company said in a statement on its web site yesterday. The profit missed the Rs12.1 billion median estimate of 11 analysts surveyed by Bloomberg.
India’s currency rose to the highest in almost nine years yesterday, on speculation exporters were buying to protect earnings from further appreciation.
Tata Consultancy plans to boost wages for employees in India by 12% to 15% this year as it seeks to stem employee defections.
Rs.Can you afford a 12 to 15% increase in wages in India and 3 to 5% internationally?’’ Ramadorai said today. Rs.It is a stretch for sure, but it is achievable.’