Tata's revenue growth slackens, but outpaces rival Infosys

The Indian outsourcer said revenue growth in dollar terms was 13 percent in the quarter

Tata Consultancy Services on Thursday reported year-over-year revenue growth of 13 percent in U.S. dollar terms in the second quarter, a lower increase than for the same period in 2011, reflecting the uncertain business environment in its key markets of the U.S. and Europe.

The company, which posted revenue growth of 34.4 percent in dollar terms in the same quarter last year, however reported strong growth in rupee terms, reflecting a sharp depreciation of the Indian rupee against the U.S. dollar.

TCS, which is India's largest outsourcer, said that revenue in the quarter was US$2.73 billion in accordance with international financial reporting standards (IFRS). Net profit at $604 million was up 13.6 percent from the same quarter last year.

The company's revenue in rupees was however up 37.7 percent while net profit was up 37.8 percent.

TCS' slow revenue growth reflects a sluggish market for outsourcing services, said Sudin Apte, principal analyst and CEO of Offshore Insights, a research and advisory firm.

But the company is likely to do better than most of its Indian competitors because of its investments in a number of areas such as domain expertise, global delivery and intellectual property, Apte said.

"All our investments are coming through," N. Chandrasekaran, CEO and managing director of the company, said during a press conference that was also webcast. The company saw revenue growth across service lines and industries, including telecom, which had been lagging for a while, he added.

The depreciation of the rupee helped the company mitigate the impact of costs such as wage increases as well as recruiting and training new hires, he said.

The company added 29 clients, taking the number of active clients to 1,032. It added 4,962 staff in the quarter, taking the total to 243,545. It derived 53.5 percent of its revenue in the quarter from North America and about 27 percent from Europe.

TCS' fiscal year runs through March 31, 2013.

Earlier in the day, Infosys, India's second largest outsourcer, reported that its revenue growth dropped to about 5 percent in U.S. dollar terms in the second quarter, down from 23 percent revenue growth in the same quarter last year.

Infosys said the cancellation of a project in Europe was one of the factors that led to slower revenue growth in the quarter. The company expects 5 percent revenue growth in its current fiscal year in an uncertain market.

John Ribeiro covers outsourcing and general technology breaking news from India for The IDG News Service. Follow John on Twitter at @Johnribeiro. John's e-mail address is john_ribeiro@idg.com

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