Tata Follows Infosys to Post Slower Growth

Tata Consultancy Services (TCS), India's largest outsourcer, posted slower profit and revenue growth in the quarter ended June 30, as Indian outsourcers weather an economic downturn in the U.S., their main market.

TCS reported on Wednesday profits of US$296 million, up 2 percent from the same quarter in the previous year. Revenue grew at 21 percent to $1.5 billion, but the growth rate was lower than reported last year by TCS for the same quarter.

Describing the business environment as challenging, TCS said it was able to hold its operating margins steady during the quarter through cost cutting and better operating efficiency. The annual wage increases at the company also came into force during the quarter.

India's second-largest outsourcer, Infosys Technologies, reported last week that its revenue for the quarter ended June 30 was $1.16 billion, up 24.5 percent from the same quarter in the previous year. Profits grew by 16 percent to $306 million. However, revenue and profit growth were far lower than reported last year by the company for the comparable quarter.

The next quarter, ending September, is also likely to be difficult for Indian outsourcers, as customers continue to postpone decisions, according to analysts. New orders are likely to pick up after that, they said.

India's National Association of Software and Service Companies (Nasscom) forecast earlier this month that the growth in India's IT and services industry would take a dip because of the oil price hike and the economic slowdown in the U.S. Nasscom expects revenue growth this year of between 21 percent and 24 percent for software and services, both from the domestic and export markets. This is lower than the 28 percent growth in the country's software and services revenue in the Indian fiscal year to March 31, 2008.

TCS added 4,895 employees during the quarter, taking the total number of staff at the end of the quarter to 116,308. The attrition rate in the company's BPO (business process outsourcing) business was 20.5 percent, but was lower (at 12.1 percent) in its IT services operations. The company added 35 clients during the quarter.

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