Tata Consultancy Profit Rises Fastest in Three Years on Demand

April 20 (Bloomberg) -- Tata Consultancy Services Ltd. reported the fastest profit growth in three years as overseas companies and governments outsourced more computer operations to India’s largest software-services provider.

Net income rose 47 percent to 19.3 billion rupees ($431 million) in the three months ended March 31, Mumbai-based Tata Consultancy said yesterday. That compared with the 18 billion rupee average of 26 analyst estimates compiled by Bloomberg. Profit jumped by the most since the three months through March 2007.

Tata Consultancy joins second-ranked Infosys Technologies Ltd. in signaling demand for their services is strengthening as customers in the U.S. and Europe resume spending. Orders are set to rise at Indian technology vendors after Oracle Corp. forecast the fastest growth in new software licenses since the onset of the global recession, according to Forrester Research Inc.

“Work will soon start to kick in following these licensed software sales” as companies hire Tata Consultancy and rivals to customize software, Andrew Bartels, an analyst at Cambridge, Massachusetts-based Forrester said by phone before the earnings announcement. “For service vendors, it looks like it’s going to be a summer, not just a spring.”

Tata Consultancy fell 0.4 percent to 811.95 rupees in Mumbai yesterday. The earnings were announced after markets closed. The stock was the third-best performer in the past 12 months on India’s Sensitive Index, almost tripling in value compared with a 58 percent advance by the benchmark index in the period.

‘Across the Board’

Fourth-quarter sales grew 7.9 percent to 77.4 billion rupees, after the company won orders including a five-year contract for information-technology infrastructure services from Malaysian Airline System Bhd. Tata Consultancy, which provides computer services and back office support to 917 clients including Citigroup Inc. and BP Plc, was last month picked by the Personal Accounts Delivery Authority in the U.K. to administer the national pension program.

“The good thing is traction is happening and we are seeing a deal pipeline across the board,” Chief Executive Officer N. Chandrasekaran told reporters in Mumbai yesterday. “Growth will be led by the U.S. and emerging markets followed by the U.K. and Europe.”

Pursuing Contracts

Tata Consultancy is pursuing contracts of various sizes ranging from $50 million to $500 million and plans to spend about $200 million on salary increases in the year that started April 1. Revenue from corporations in North America accounted for 54 percent of sales in the last quarter, rising from 52.5 percent in the prior three-month period, the company said.

Worldwide information and communication technology spending, which includes computer and network equipment purchases, will grow 7.7 percent this year from an estimated $1.46 trillion in 2009, according to Forrester. Spending in the U.S. will outpace gross domestic product growth as companies increase discretionary spending to make up for orders delayed during last year’s recession, the researcher said.

Infosys last week forecast sales in the 12 months ending March 31, 2011, may increase as much as 18 percent to $5.67 billion, the fastest pace in three years. Accenture Plc has projected sales may grow as much as 10 percent next year as companies resume technology spending, which is forecast to grow 8.4 percent in the U.S. this year, according to Forrester.

Tata Consultancy, which ended the 12-month period through March with 160,429 employees, has made more than 20,000 job offers on college campuses, according to a company presentation to analysts on its Web site.