Bangalore: Software exporter Tata Consultancy Services Ltd, or TCS, said orders have rebounded to levels before the collapse of Lehman Brothers Holdings Inc. and projected sales will keep rising for at least two years.
The size of the order book is as good as in the pre-Lehman days, chief financial officer S. Mahalingam said in a telephone interview from Mumbai on Monday. Customer contracts are sufficient to drive revenue gains every quarter for the next two-three years, he said.
TCS’ projection signals financial companies are increasing technology spending as the global economy recovers from its worst recession since the 1930s. Demand may also improve as profits rebound at banking clients from Citigroup Inc. to JPMorgan Chase and Co. and companies in the US and Europe seek to send more work to India.
Growth projection: A file photo of Tata Consultancy Services’ office in Noida. The information technology firm says it has enough customer contracts to drive revenue gains every quarter for the next two-three years. Harikrishna Katragadda / Mint
In-house spending and spending on non-Indian or local players may reduce and outsourcing to India and destinations such as India may increase as part of a consolidation of technology-services suppliers, Tarun Sisodia, director of research at Anand Rathi Financial Services Ltd in Mumbai, said over the phone. Sisodia has a buy rating on the technology firm.
TCS last week joined second-ranked Infosys Technologies Ltd in posting profits that beat analysts’ estimates and said it’s seeing signs of a rebound in demand for its services. By contrast, International Business Machines Corp., the world’s largest computer services provider, last week reported a drop in contract signings.
Sales may grow at least 20% every year once the global economic recovery starts, Mahalingam said.
“We find that there is a level of positive outlook by the chief information officers and we are keenly watching the budgets,” he said. “It could be that a higher share of that will be spent on services; in terms of outsourcing, that would be a higher share coming out of that.”
Net income rose 29% to Rs1,620 crore in the quarter ended 30 September, Mumbai-based TCS said on 16 October. That beat the Rs1,510 crore median of 32 analyst estimates compiled by Bloomberg.
TCS gained 2.09% to close at Rs621.40 on the Bombay Stock Exchange. The stock has more than doubled this year, compared with an 80% gain for the benchmark Sensex and a 98% advance for Infosys.
The software services firm won contracts across the board, chief executive officer N. Chandrasekaran said last week. During the quarter, the firm won at least two orders worth at least $100 million (Rs460 crore) each.
Citigroup last week reported a $101 million profit for the third quarter, defying expectations for a loss as the firm added the smallest amount to loan-loss reserves in two years. JPMorgan last week posted third-quarter earnings of $3.59 billion, its highest profit since the subprime mortgage market collapsed.
TCS said in July that Citigroup was helping lead a recovery in demand from financial clients, the biggest contributors to revenue for the software services company.
US technology demand will begin to increase in the December quarter, followed by a global recovery in 2010, research firm Forrester Inc. said last month. It expects a strong recovery in the US information technology market in 2010, with 7.7% growth, led by consulting services, the firm’s analyst Andrew H. Bartels wrote in a report dated 29 September. Vendors need to look beyond the decline and prepare for a strong recovery in late 2009 and 2010, he wrote.