India’s leading software services exporter, Tata Consultancy Services (TCS.NS), is eyeing acquisitions in Germany and Japan in the healthcare sector, its chief executive said on Monday, as it looks to expand beyond its core U.S. market.
TCS and smaller rivals Infosys (INFY.NS) and Wipro (WIPR.NS) have been looking for overseas acquisitions to boost growth amid growing competition from global rivals such as IBM (IBM.N) and Accenture (ACN.N).
“We want to look at opportunities for bringing some strategic capabilities, whether it is in platforms, whether it is in markets,” N. Chandrasekaran told Reuters in an interview at the company’s corporate headquarters.
The company, which has about $2 billion in cash, has not earmarked a specific amount for acquisitions, he said.
TCS expects to see “marginal improvement” in pricing for the fiscal year that began in April and expects to sustain current operating margins, Chandrasekaran said. The firm posted operating margins for fiscal year 2011 of 27.8 percent under U.S. accounting rules.
TCS, whose clients include Citigroup (C.N) and General Electric (GE.N), last week reported a 23-percent rise in fourth-quarter profit, beating estimates on rising demand. But the firm flagged wage hikes and currency volatility as main threats to its profit margins for this fiscal year. [ID:nL3E7FL18Q].
The U.S. technology market, the largest for Indian technology firms, will expand 8 percent in 2011, up from 7.4 percent projected earlier, with software, IT consulting services and technology outsourcing growing faster than last year, research firm Forrester said earlier this month.
The United States accounts for more than 50 percent of the revenue at Indian technology firms. Still, Indian firms are looking to grow in Europe, where demand has long been tepid, and emerging markets like Latin America, where rapidly growing economies are spurring demand for outsourcing.
TECH BUDGETS ON THE RISE
TCS expects technology budgets at top clients to rise 1 to 4 percent in the current fiscal year as companies boost spending on technology to improve efficiency, Chandrasekaran said.
TCS expects attrition to reduce by 1 to 2 percent points in the current fiscal year, he added.
Attrition at TCS stood at 14.4 percent in the fourth quarter, lower than Infosys, which saw a 17 percent turnover rate in the same period.
Chandrasekaran, who is also the managing director of TCS, said staff turnover was a challenge for TCS, and the company would be comfortable with a 10 percent attrition rate over the medium to long term.
Indian technology firms are seeing high turnover rates as they battle to keep their staff from being poached by larger global rivals.
Still, the company expects to continue gaining traction, Chandrasekaran said.
“The macro is something we have to keep in the back of mind, but there are lot of signs of pick up in deal momentum,” he said.
The company is seeing increased business opportunities in new services sector like pharma, retail and utilities while it expects its mainstay financial services sector to continue to grow, he added.
TCS is “investing a lot” on developing new platforms for supply chain and social media and on cloud computing, Chandrasekaran said.
Cloud computing, or the hosting of sites and services on the Internet, is viewed as the future of computing for consumers and corporations in an increasingly wireless world.
Shares in TCS, valued at about $52 billion, were flat in mid-day trade after falling 1.6 percent earlier in the day . Credit Suisse on Monday downgraded TCS to “neutral” from “outperform, ” saying all positives were priced in.
Source:http://www.reuters.com/article/2011/04/25/idUSL3E7FP0NF20110425
