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Tata Consultancy Services' outlook lifts some gloom after Infosys shocker

TCS cemented its leading position, reporting June quarter growth above analyst expectations and saying it could deliver full-year results ahead of industry lobby Nasscom's dollar revenue estimates, provided currency volatility was not too sweeping.

twitter-logo Goutam Das        Last Updated: July 13, 2012  | 11:24 IST

Goutam Das
Goutam Das
India's largest IT exporter TCS cemented its leading position, reporting June quarter growth above analyst expectations and saying it could deliver full year results ahead of industry lobby Nasscom's dollar revenue estimates, provided currency volatility was not too sweeping.

TCS was trading 1.81 per cent higher at Rs 1,258 on the BSE at 11 AM on Friday.

This was in stark contrast to Infosys, which earlier in the day disputed Nasscom's projections of 11 per cent to 14 per cent industry growth. "Nasscom's dollar guidance is very ambitious. It should become the rupee guidance," Infosys CFO V Balakrishnan had remarked, in a slightly sarcastic tone, during a press conference in Bangalore.

Infosys, battling both macroeconomic and company-specific headwinds, has guided for just five per cent growth in 2012/13.

TCS's dollar revenues for the June quarter jumped three per cent to $2,728 million over the previous quarter, while Infosys saw its revenues decline 1.1 per cent.

"We have seen strong, secular growth across all our service lines and industry segments driven by robust volumes from key markets like North America and Europe," TCS CEO N. Chandrasekaran noted. Although he cited caution given the global economic climate, he and other senior members of his team displayed cool confidence during their press meet in Mumbai. "TCS continues to see good demand from global corporations as it successfully navigates an increasingly complex environment.
Technology has a role to play in this environment. Customers are executing to a plan and there are opportunities," Chandrasekaran added.

The firm reported operating margins of 27.5 per cent, a contraction of 20 basis points. Gains from the rupee depreciation were offset by wage hikes, people additions and visa expenses. In rupee terms, net profits stood at Rs 3,318 crore, a growth of 14.6 per cent.

TCS said it would not cut down on any investments and would continue to build its infrastructure, hire people and invest in sales.

"The results reaffirm the fact that company specific issues continue to plague the performance of Infosys, while the underlying health of the market was confirmed by TCS results. This is very clearly another strong step in the 'changing of the guard' on the Indian service provider landscape, with TCS taking over from Infosys as the industry bellwether. It would be a mistake going forward to continue to tie the industry's fortunes to that of Infosys, as the market has historically done. It is time to change that thinking now," Partha Iyengar, Country Manager of Research at Gartner India says.

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