Tata Consultancy Net Beats Estimates on Costs, Dollar

July 17 (Bloomberg) -- Tata Consultancy Services Ltd., India’s largest software exporter, beat analysts’ estimates as profit climbed 23 percent on pared costs and a weaker dollar that boosted the value of overseas earnings.

First-quarter net income rose to 15.2 billion rupees ($312 million) in the three months ended June 30, from 12.4 billion rupees a year earlier, Mumbai-based Tata Consultancy said today. That compared with the 12.9 billion-rupee median of 21 analyst estimates compiled by Bloomberg.1. Sales climbed 12 percent.

Tata Consultancy joins closest rival Infosys Technologies Ltd. in beating estimates after the software provider froze pay and capped hiring to cope with the global recession. Chief Executive Officer Subramanian Ramadorai plans to boost non-U.S. sales to reduce the company’s dependence on its biggest market.

“Indian IT companies are going to benefit greatly because of their cost structures” when a recovery begins, Gopal Agrawal, head of equities at Mirae Asset India Investment Co. in Mumbai, said before the results. “Cross-currency movements in the last quarter” also helped software exporters, said Agrawal, who supervises $50 million including Tata Consultancy shares.

The dollar’s 13 percent decline in the quarter against the pound and 5.6 percent drop versus the euro also boosted earnings. The U.K. market contributed 17 percent of Tata Consultancy’s revenue in the quarter, while continental Europe provided 11 percent.

Tata Consultancy rose 3.4 percent to close at 434.1 rupees in Mumbai trading before the results were reported. The stock has added 82 percent this year, outpacing a 53 percent gain for the benchmark Sensitive Index and Infosys’s 67 percent advance.

Orders Boost Revenue

Sales rose to 72.1 billion rupees, beating analysts’ median estimate of 69.2 billion rupees after Tata Consultancy won eight “large” deals, including five from companies in the U.S.

“In times like this, I believe, we’ve managed our operations exceptionally well,” Ramadorai said at a briefing. “The overall growth has been broad-based across major and emerging markets. We’ve increased our wallet share with our top 10 clients as well.”

Tata Consultancy, which provides computer services and back-office support to Citigroup Inc., Volkswagen AG and other customers, said it won a multimillion dollar order from a specialty retailer in the U.S., where it gets half its sales. The Indian company also signed a multi-year contract with an Australian energy retailer for managing software applications.

Top 10 Clients

The share of revenue from Tata Consultancy’s 10 biggest customers rose to 28 percent in the quarter, from 26.9 percent in the preceding three months, the company said in a presentation to analysts and posted on its Web site.

The proportion of revenue accounted for by sales in the home market rose to 9.1 percent, from 8.2 percent in the previous quarter. Tata Consultancy aims to double sales in India to $1 billion in the next three years, Chief Operating Officer Natarajan Chandrasekaran said in April.

Infosys last week reported profit for the quarter ended June 30 rose 18 percent to 15.3 billion rupees, beating analysts’ estimates, after the company trimmed costs and won orders, including two from Fortune 500 companies.

‘Watchful of the Situation’

“The global economy across countries continues to be weak,” Ramadorai said. “We are certainly watchful of the situation and we don’t rule out the fact that more surprises can be expected.”

Chrysler LLC, which gave Tata Consultancy an order earlier this year, filed for bankruptcy April 30. Citigroup has received a $52 billion government bailout and financial firms worldwide have shed more than 328,000 jobs since the financial crisis started, according to data compiled by Bloomberg.

“IT services firms are mainly catering to global companies in America, mainly U.S. banks, which of course are suffering from the downturn in the financial industry,” Gunnar Pahlson, who oversees $500 million in emerging markets stocks at Sweden’s HQ Fonder AB, said by phone from Stockholm before the results were reported. “I don’t think you should expect a recovery in order flow this year; maybe next year.”

The U.S. information-technology market will shrink by 5 percent in the year ending December and global IT spending will decline 11 percent, Cambridge, Massachusetts-based Forrester Research Inc. forecast last month. Forrester expects a “strong technology recovery” in late 2009 and 2010.

IBM, Intel

International Business Machines Corp., the world’s biggest computer-services provider, yesterday reported second-quarter earnings that topped estimates and raised its full-year forecast. Intel Corp., the world’s biggest chipmaker, also beat estimates with its quarterly results, which were announced on July 14.

The U.S. economy will expand faster than previously forecast in the second half of this year and in 2010 as a revival in consumer spending signals an end to the recession, a Bloomberg News survey of economists showed last week.

Growth will average 1.5 percent in the July-to-December period, compared with last month’s 1.2 percent projection, according to the median of 57 forecasts in the survey.

Tata Consultancy is seeing some signs of improvement in its biggest market and among financial clients, Chandrasekaran said.

“We’ve seen growth in the U.S., we’ve seen growth in the financial services sector,” he told reporters at the briefing. “The deal pipeline is healthy and distributed across industries. Still, we’re cautious about manufacturing and high-tech.”

Wipro Ltd., India’s third-largest computer-services company, will report first-quarter earnings on July 22.