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TCS adds clients to beat profit forecast

Logos of Tata Consultancy Services (TCS) are displayed at the venue of the annual general meeting of the software services provider in Mumba
Logos of Tata Consultancy Services (TCS) are displayed at the venue of the annual general meeting of the software services provider in Mumba

By Aradhana Aravindan and Harichandan Arakali

MUMBAI/BANGALORE (Reuters) - Tata Consultancy Services Ltd, India's No.1 software services exporter, topped expectations with a 23 percent rise in quarterly profit and reiterated it should beat a closely watched industry growth forecast.

India's $100 billion IT services sector is under pressure to sustain growth as clients in key markets, including Europe and the United States, have been keeping a tight grip on tech spending because of global economic uncertainty.

"We are finishing the calendar year very well and look very confident going into the future in Q4 and FY14," chief executive N Chandrasekaran told reporters on Monday, adding he felt positive about clients' technology budgets.

The number of clients contributing $100 million or more annual revenue rose to 16 in the quarter, from 14, TCS said, adding it also won 31 new clients in the period.

The company, which does not give detailed revenue forecasts, said it still expected to beat an industry export revenue growth estimate made by the National Association of Software and Service Companies (NASSCOM).

In November, NASSCOM said the sector was likely to meet the lower end of its revenue growth outlook of 11-14 percent for the fiscal year to end-March.

TCS said net profit for the three months to December rose to 35.5 billion rupees ($652 million), compared with a forecast for 32.4 billion in a Thomson Reuters poll.

BRIGHTER OUTLOOK

Infosys Ltd had fuelled expectations the sector may be turning a corner when the second-ranked software group raised its full-year revenue forecast on Friday after new clients and an acceleration in IT spending by existing customers helped it post a stronger-than-expected profit.

TCS's revenue, in dollar terms, rose 3.3 percent quarter-on-quarter to $2.95 billion. That compared with a 6.3 percent rise at Infosys, which was helped by its purchase of Swiss consultancy Lodestone Holdings.

"This quarter's numbers are not that exciting, but the management's commentary on FY14 is more positive," said Rikesh Parikh, vice president for markets strategy and equities at Motilal Oswal Securities in Mumbai.

Shares in TCS, valued at $48 billion, closed 2.2 percent higher at 1334.50 rupees ahead of the results, adding to Friday's 3.8 percent gain on unexpectedly strong results from rival Infosys, which itself ended 3.5 percent higher on Monday. The broader market was up 1.2 percent.

Wipro Ltd, the country's No.3 software services provider, may report a quarterly profit gain of 6.7 percent, analysts said. The company, spinning off non-information technology businesses to focus on IT, will announce earnings on January 18.

Fourth-ranked HCL Technologies Ltd was expected to report a 44 percent jump in quarterly profit on January 17.

($1 = 54.47 rupees)

(Editing by Tony Munroe and Dan Lalor)

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