India's top software services provider Tata Consultancy Services (TCS) said demand in the key US market is strong across its business segments, with regional banks stepping up spending on technology. The Mumbai-based company said that profit jumped 23 per cent in the quarter ended December, beating analysts' expectations. TCS also gave an upbeat growth outlook, sending its shares up the most in more than eight months and prompting analyst upgrades on the stock.
Economic uncertainty in the United States had fuelled investor worry that clients may keep theirIT budgets tight and postpone decision-making on technology spending.
"The US is still a growth market," Chief Financial Officer S Mahalingam told Reuters in an interview at his Mumbai office on Tuesday. "If it sneezes then we have got a big problem. (But) the demand is very good across all segments."
The United States accounts for about half of TCS' revenue, compared with more than 60 per cent overall for India's $100 billion outsourcing industry.
Banks, insurers and other financial services clients usually account for more than a third of the revenue at companies such as TCS' rivalInfosys, where better-than-expected results on Friday and an increased revenue outlook powered a 20 per cent rise in its shares over two sessions.
"(The) US economy has regional banks as well, and they are starting to spend. So there is growth," Mahalingam said.
While Monday's results prompted analysts from HSBC and CLSA to increase their ratings on TCS stock, some analysts said volume growth was not especially impressive.
Volumes, or billable hours, rose 1.25 per cent on a sequential basis, while revenue in dollar terms increased 3.3 per cent over the September quarter.
"The key disappointment was soft volume growth of 1.25 per cent quarter-on-quarter. However, we remain assured by management's optimistic outlook on FY14 growth," Nomura analysts wrote in a note to clients.
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