India’s Tata posts strong revenue, weak profit

Tata Consultancy Services, India’s largest outsourcer, Thursday reported good revenue growth for the quarter ended Dec. 31, 2005 based on new client wins and an increase in business from existing clients.

Revenue for the quarter was 32.6 billion Indian rupees ($721 million at the exchange rate on the closing day of the quarter), up by 26.6% over revenue of 25.8 billion rupees in the same quarter the previous year.

However, profit for the quarter grew by a mere 3.6% to 7.32 billion rupees, from 7.0 billion rupees in the same quarter the previous year, as the company’s expenditure on salaries and wages more than doubled.

The results are based on U.S. generally accepted accounting principles (GAAP), and refer to the third quarter of TCS’ fiscal year which runs to March 31 this year.

Indian outsourcing companies are riding a boom in outsourcing. A report released in December by management consulting firm McKinsey & Co. and the National Association of Software and Service Companies (Nasscom) in Delhi was upbeat about the prospects for India’s outsourcing industry. India can sustain its global leadership position in offshoring, and grow its IT and business process outsourcing (BPO) industries at an annual rate of over 25% to generate export revenues of about $60 billion by 2010, the report said.

India’s second largest outsourcer, Infosys Technologies Wednesday announced 32.2% growth in revenue and 27.7% growth in profits for the quarter ended Dec. 31, 2005, as business for new services picked up.

Indian outsourcing companies are, however, facing an increase in manpower costs, the Nasscom-McKinsey report added.

TCS added 6,076 employees during the quarter, taking the total number of staff to 59,384 at the end of the quarter, as against 43,681 staff at the end of the same quarter last year.

The company added 83 new clients during the quarter, including a BPO deal from Pearl Group, an insurance and pensions firm in Peterborough in the U.K. During the quarter, it acquired 100 percent of the equity in Chilean banking and pensions BPO company Comicrom of Santiago. It also acquired Financial Network Services (FNS), a privately held banking software vendor in Sydney, Australia, in a bid to grow its business in the banking and financial services market. That market accounted for 42.3% of the company’s revenue in the quarter ended Dec. 31, 2005.