Published January 15, 2013
MUMBAI/BANGALORE – India's top software services provider Tata Consultancy Services Ltd (TCS) said demand in the key U.S. market is strong across its business segments, with regional banks stepping up spending on technology.
The Mumbai-based company said on Monday that profit jumped 23 percent in the quarter ended December, beating analysts' expectations. TCS also gave an upbeat growth outlook, sending its shares up the most in more than eight months and prompting analyst upgrades on the stock.
Economic uncertainty in the United States had fuelled investor worry that clients may keep their IT budgets tight and postpone decision-making on technology spending.
"The U.S. is still a growth market," Chief Financial Officer S Mahalingam told Reuters in an interview at his Mumbai office on Tuesday. "If it sneezes then we have got a big problem. (But) the demand is very good across all segments."
The United States accounts for about half of TCS' revenue, compared with more than 60 percent overall for India's $100 billion outsourcing industry.
Banks, insurers and other financial services clients usually account for more than a third of the revenue at companies such as TCS' rival Infosys Ltd , where better-than-expected results on Friday and an increased revenue outlook powered a 20 percent rise in its shares over two sessions.
"(The) U.S. economy has regional banks as well, and they are starting to spend. So there is growth," Mahalingam said.
While Monday's results prompted analysts from HSBC and CLSA to increase their ratings on TCS stock, some analysts said volume growth was not especially impressive.
Volumes, or billable hours, rose 1.25 percent on a sequential basis, while revenue in dollar terms increased 3.3 percent over the September quarter.
"The key disappointment was soft volume growth of 1.25 percent quarter-on-quarter. However, we remain assured by management's optimistic outlook on FY14 growth," Nomura analysts wrote in a note to clients.
(Editing by Tony Munroe and Ryan Woo)