TCS Follows in the Footsteps of Infy, Has Great Q3 Run

Net up 1.4%; triggers growth revival hopes India's biggest software company delivered another solid performance in what is traditionally a soft quarter for the industry, and its chief executive predicted that the coming financial year will be better than the one that ends in March 2013.  With second-ranked Infosys beating analysts' expectations by a wide margin when it announced third-quarter results on Friday, there is a stirring of hope that growth is beginning to return to India's $100-billion IT services industry.  "2013-14 will be a better year than the current fiscal year. I would like to reinforce that. We see that the momentum is good," said TCS Chief Executive N Chandrasekaran.  The Mumbai-based company reported 3.3% growth in revenue to $2.948 billion (. 16,070 crore) during the December quarter as large clients spent more on technology services. With better utilisation of its nearly 2.6 lakh employees, TCS raised its profit by 1.4% to $652 million (. 3,552 crore).  Chandrasekaran said that in the next fiscal, companies' spending on getting their operations digital-ready would be a key growth driver. "Clients may cut their (technology) spend but increase their extent of offshoring," he said, echoing what technology market researchers such as Gartner have been predicting. Gartner has forecast that spending with India-based service providers will increase even if IT budgets come down. Infosys, which has said it expects to close 2012-13 with $7.45 billion in revenue, has been far more subdued in its view of the market, pointing to volatility and a lack of clear visibility into client budgets. Many analysts have cautioned that it is far too early to call a turnaround for the Bangalore-based company which has been lagging the industry for the last two years.  TCS, which unlike Infosys does not give growth guidance, has said it will beat the top end of forecast of 11-14% for the industry. "We were expecting a 30-basis point drop in operating margin but the company has outperformed with a 51-basis points rise," said Ankita Somani, IT analyst with Angel Broking. Shares of TCS closed 2% up at . 1,334.30 on BSE on Monday before results were announced. TCS' Attrition Falls to Record Low of 10%  The Infosys stock, which gained 17% on Friday, gained another 3.5% on Monday.  TCS saw growth in all regions except continental Europe. However, Chandrasekaran pointed out that the softness had come on the back of growth in previous quarters.  "It should be seen as oneoff," he said, adding that Europe was also expected to do better in 2013-14.  But in a likely reflection of the uneven growth and select hiring among players in the software industry, TCS saw employee turnover fall to record low of below 10% in its IT services business. Including BPO, attrition was 11.2%. This is in contrast to Infosys, which had an attrition rate of 15.2% during the quarter.  TCS also saw financial services clients halting work temporarily in the December quarter, a phenomenon that Chandrasekaran termed as usual for the manufacturing and hi-tech industry verticals but which was seen for the first time in financial services.  Analysts, however, said they did not see this as a concern continuing into the fourth quarter, although the final quarter is also a typically tepid one because of slower decision-making around the budgetary cycles and the shorter month of February.  TCS said it had hired almost 50,000 employees so far in the fiscal.  "We continue to forecast healthy growth in the workforce numbers going forward," said Ajoy Mukherjee, the global head for human resources.