Tata Consultancy Net Beats Estimates as Outsourcing Orders Climb

Tata Consultancy Services Ltd. (TCS), Asia’s largest computer-services exporter by market value, reported second-quarter profit that beat analysts’ estimates after winning more information-technology outsourcing orders.

Net income rose 34 percent to 47 billion rupees ($760 million) in the three months ended September, Mumbai-based Tata Consultancy said yesterday. That surpassed the 45.3 billion-rupee median of 45 analysts’ estimates compiled by Bloomberg.

Tata Consultancy joins its closest Indian competitor Infosys Ltd. (INFO) in signaling demand for outsourced software work has increased. The rupee’s depreciation against the U.S. dollar in the past year is also bolstering the IT industry’s margins spurring ratings upgrades including at Goldman Sachs Group Inc., which on Oct. 2 raised the company’s stock to buy.

“These are superb results; they’ve continued their pace of revenue growth and their outlook is good,” said Urmil Shah, a Mumbai-based analyst with Kim Eng Securities Ltd. “TCS is just winning more large deals than their biggest competition, including Infosys. They’ve diversified their efforts and are growing across all industry verticals.”

Shares of Tata Consultancy rose 0.1 percent to 2,215.40 rupees before the earnings announcement yesterday. The stock has climbed 76 percent this year, compared with a 5.8 percent gain for the S&P BSE Sensex and second-ranked Infosys’s 45 percent advance.

‘Robust Demand’

“We continue to see a robust demand pipeline across markets,” Chief Executive Officer N. Chandrasekaran said in a statement. The software provider also has “a unique opportunity to strategically partner and participate with clients as they reimagine their future.”

Sales climbed 34 percent to 209.8 billion rupees. That compared with the 207.7 billion-rupee median estimate compiled by Bloomberg.

Worldwide spending on information technology services is forecast to grow 3.4 percent this year, researcher IDC said on Aug. 5, lowering its earlier estimate for 3.8 percent growth.

Tata Consultancy provides computer services and back office support to companies including Citigroup Inc. and Scandinavian Airlines System. The Indian software company also completed its acquisition of France’s Alti SA in July.

The Indian currency fell 5.2 percent against the dollar in the July-September period helping pare the cost of India’s software services to overseas buyers. Tata Consultancy’s share of revenue from North America was 53 percent last year.

Infosys surged to the highest level in 2 1/2 years in Mumbai trading on Oct. 11 after it raised its annual sales forecast, citing an increase in demand. The Bangalore-based software exporter said full-year revenue in dollar terms was expected to rise by 9 percent to 10 percent from its earlier projection of 6 percent to 10 percent.

To contact the reporters on this story: Kartikay Mehrotra in New Delhi at kmehrotra2@bloomberg.net; Anoop Agrawal in Mumbai at aagrawal8@bloomberg.net

To contact the editor responsible for this story: Michael Tighe at mtighe4@bloomberg.net

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.