Well, we have heard this already from Wipro and now it’s the turn of India’s largest software service provider. TCS has commented that it is seeing an end to the decline in demand from its biggest clients. The biggest clients who had reduced their IT budgets by more than 20% are seen to taking their legs off the brakes. TCS commented that the clients have reached a stage where they are able to justify the spending and as the economy improves they may be looking at higher budgets.
TCS had beat the so called estimates provided by a bunch of so called analysts, failing which the stock prices would have been pulled down. Net income of the company rose by 23% to around 312 million USD in the June quarter. Sales rose to about 7200 crore and this was on back of the eight large deals that the company had won recently.
TCS had earlier announces that i won a multi million dollar order from a specialty retailer in US and it had also signed a multi year contract with an Australian energy retailer for managing software applications. Still most of the revenues continued to come from US and the revenues from US have actually increased by more than 3%.
The share of revenues from TCS’ 10 biggest clients rose to 28% from 26.9% in the previous quarter. Interestingly, the share of revenues by sales in the home markets rose to 9.1% from about 8.2% in the previous quarter. This is way higher when compared the more than 1% by Infy and Wipro. TCS is actually aiming at doubling it’s sales in India to about a billion USD in the next 3 years.
Though the slide the number of projects coming out of US seems to have been arrested, the recovery in not really going to be V – shaped. American banking sector has been the major client to the big 3 in India and this is the sector which has faced most of the problems. Citigroup has received around 52 billion USD from the government and has shed more than 328,000 jobs since the crisis started. Chryles which had earlier given a big project to TCS filed for bankruptcy in April this year.
It is interesting to note that not only Indian companies like TCS and Infy, the global major IBM has also reported better than expected numbers. The chip manufacturer Intel has also beat the expectations. It would now be quite interesting to see what Wipro would offer this 22nd.
To contact the equity analyst on this story: Arun Gopalan in Chennai at Arun@hbjcapital.com