Tata revenue and profits up as outsourcing market improves

Credits aggressive cost-cutting, wage freezes for positive year-end results

India's largest outsourcer, Tata Consultancy Services (TCS), reported Friday an increase in revenue and profit in U.S. dollar terms for the quarter ended Dec. 31, reflecting a turnaround in the offshore outsourcing market.

TCS said that its revenue had grown by 10.3% to $1.64 billion in the quarter from the same quarter in the previous year. Its profit grew by 39% to $384 million.

The company's results are in compliance with U.S. GAAP (Generally Accepted Accounting Principles).

The company's revenue was down by 2.3% in the previous quarter ended Sept. 30, but profit was up 8%.

"Growth has come across the board, across geographies, and industries," said N. Chandrasekaran, the company's CEO and managing director at a press briefing that was also webcast.

TCS added 32 clients in the quarter, taking the total to 917. The company is also pursuing at least 20 large deals in the current quarter, Chandrasekaran said.

India's outsourcing industry is recovering, though it will take some time for the top companies to achieve the revenue growth of over 30% that they had up to early 2008, before the impact of the recession, analysts said.

Most of the business to Indian outsourcers is still necessary or maintenance expenditure, with discretionary spending on IT likely only by the middle of this year, said Diptarup Chakraborti, principal research analyst at Gartner.

Infosys Technologies, India's second largest outsourcers, reported on Tuesday that its revenue in the quarter ended Dec. 31 had grown by 5.2% from the year earlier period. Profit growth was flat at 0.6%t. The company had posted a decline in revenue and profit growth in the previous quarter.

Indian outsourcing companies are however grappling with a rising rupee against the U.S. dollar and the U.K. pound. A large proportion of their expenses are in rupees on staff and facilities in India.

TCS' revenue grew in rupee terms by 5.1% in the quarter. Profit growth was however higher at 34%, because of aggressive cost cutting by the company, and higher delivery of services offshore from India, said S. Mahalingam, the company's chief financial officer.

The company has also postponed wage hikes, which will now be considered after April, said Ajoy Mukherjee, TCS' head of human resources.

Anticipating a further recovery, TCS added 7,692 staff in the quarter to Dec. 31, taking the total staff at the end of the quarter to 149,654. The company plans to hire about 8,000 trainees and about 3,000 experienced staff in the current quarter.

TCS plans to add staff at both its offshore facilities in India, and at facilities closer to clients in other countries, including in the U.S., Chandrasekaran said. Currently, 92.6% of the company's staff are Indians.


Copyright © 2010 IDG Communications, Inc.

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