Tata Consultancy shares gain to record; Wipro falls

Tata Consultancy shares gain to record; Wipro falls

Mumbai: Tata Consultancy Services Ltd., India’s largest software exporter, climbed to a record in Mumbai trading after the company’s profit growth outpaced those of Infosys Technologies Ltd. and Wipro Ltd.

Tata Consultancy jumped 5.5% to Rs1,040.20, the highest since the shares began trading in August 2004, after the company reported yesterday second-quarter profit that beat analyst estimates. Wipro fell 4.5%, the most since January, after its earnings in the last quarter lagged behind estimates.

Tata’s profit increased 32%, more than double Infosys’s growth and three times faster than Bangalore-based Wipro’s 9.4% profit gain. The growth in outsourcing orders for India’s three top computer-services providers contrasts with International Business Machines Corp., which earlier this week posted its third straight quarterly drop in new contracts.

Customers are increasingly consolidating outsourcing projects and Tata Consultancy has been on the favorable end of that, said Rahul Jain, an analyst at Dolat Capital Market Ltd. Tata Consultancy has been a big-time winner of the large transformational deals. Infosys, the second-largest software exporter, gained 0.6% to Rs3,053.15 at the 3:30 pm close of trading.

Positive Outlook

Mumbai-based Tata’s chief executive officer N. Chandrasekaran said the growth achieved in the past three months makes the company positive in its outlook for global demand. Infosys last week raised its guidance, indicating increased corporate spending on information technology.

Tata Consultancy is gaining over smaller rivals because clients prefer to stay with one vendor while spending their budgets, said Vihang Naik, an analyst at MF Global Ltd.

Clients are prone to have two or three big vendors, rather than a plethora of smaller vendors due to the economies of scale a single vendor can provide, said Naik.

Worldwide IT spending by businesses and governments, 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, according to the Cambridge, Massachusetts-based researcher. Spending in the country will outpace gross domestic product growth as companies make up for orders delayed during last year’s recession, Forrester said.

There’s been a shift in preference from the top US and global companies to the Indian companies because of gains you make on offshoring in terms of cost savings, said Srividhya Rajesh, who manages Rs24 billion of equities including Tata Consultancy at Chennai-based Sundaram BNP Paribas Asset Management Co. Offshoring has gained momentum since the downturn.