Tata reports strong revenue and profit growth despite uncertain market

The outsourcer expects the current fiscal year to be better than the previous one

India's Tata Consultancy Services reported strong first quarter revenue and profit growth, despite indications that the outsourcing market is still uncertain.

The country's largest outsourcer said its revenue in the first quarter increased by 14.8 percent year-on-year to US$3 billion. Net profit of $663 million in the quarter was up 13 percent from last year.

The company continues to invest in products, platforms and intellectual property relevant to its customers, said CEO and managing director N. Chandrasekaran. The company has applied for 1,280 patents, and bagged 81 so far.

Last week, India's second largest outsourcer, Infosys, said there was "volatility" in the outsourcing market while reporting that profit fell by about 4 percent year-on-year to $444 million, even as revenue grew 9.4 percent to $1.9 billion. Infosys said customers are still delaying purchase decisions.

There is a long-term return to growth in the outsourcing business, though not as high as before the 2008 financial crisis, with dramatic shifts from one quarter to another, said Siddharth Pai, president for Asia-Pacific for Information Services Group.

The research and consultancy firm reported earlier this month that annual contract value of outsourcing deals clinched in the first quarter totaled $3.9 billion, a decline of 27 percent from the first quarter of 2012. ISG reports on deals that have an annual contract value of $5 million and above.

Although Indian outsourcers offer similar services ranging from bespoke software development to system integration to consulting, TCS outstrips competitors in a difficult market because of its large number of employees and the geographies it covers, said an analyst who declined to be named. "By its size and spread, the company is less vulnerable to market shifts," he added.

For the fiscal year ended March 31, TCS reported revenue growth of about 14 percent to $11.6 billion, while profit grew 15.6 percent to $2.6 billion.

The company has a strong pipeline of deals and expects to do better in the current fiscal year, Chandrasekaran said.

TCS added 12,559 staff in the quarter, taking the company's total to 276,196 employees.

During the quarter, it settled for $30 million a class-action suit filed relating to payments of its Indian employees sent to work on projects in the U.S.

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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