Posts Tagged ‘Outsourcing’

TCS net up 13.5 percent for fiscal 2015

April 23rd, 2015

Tata Consultancy Services (TCS) posted net profit of Rs.21,696 crore for the just-concluded fiscal 2014-15, registering a 13.5 percent year-on-year (YoY) growth as per the Indian accounting standards.Outsourcing32

In a regulatory filing to the stock exchanges on Thursday, the IT bellwether said revenue for the fiscal under review (FY 2015) increased 15.7 percent YoY to Rs.94,648 crore under the Indian financial reporting standards.

Under the International Financial Reporting Standards (IFRS), gross income grew 15 percent YoY to $15.5 billion and net income 12.8 percent YoY to $3.5 billion.

Earlier, the global software major reported net profit of Rs.5,906 crore for fourth quarter (January-March) of the fiscal under review, registering 11.5 percent YoY and 8.5 percent sequential growth.

Revenue for the quarter under review (Q4) increased to Rs.24,220 crore, reflecting 12.4 percent YoY and 1.6 percent sequential growth.

Under IFRS, gross income grew 11 percent YoY to $3.9 billion and net income 10.5 percent YoY to $951 million.

“Operating profit was Rs.25,424 crore for fiscal and Rs.6,591 crore for quarter, while operating margin increased to 26.9 percent for fiscal and 27.2 percent for quarter and volume growth was 16.9 percent YoY and 1.4 sequentially.”

“We are living in a world where technology is not just becoming integral to business but to our daily lives. We are playing a leading role in this ongoing revolution, helping our clients navigate and leverage digital to help grow their businesses,” TCS chief executive N. Chandrasekaran told reporters here later.

Though the IT outsourcing major hired a whopping 67,123 people last fiscal, a record 47,931 employees left the company during the last 12 months, resulting in net addition of 19,192 techies, taking the total headcount to 319,656 at the end of March 31.

Similarly, in fourth quarter, gross addition was 14,395 and net addition 1,031, as 13,364 techies left the company between January and March, resulting in its attrition rate touching 14.9 percent on annualised basis.

On the outlook for the new fiscal (2015-16), the chief executive said a strong foundation had been laid for growth and investments in platforms, digital and automation were gaining traction with clients.

“We are upbeat on seeing more opportunities in the ensuing quarters to partner with customers across multiple industries in the US, Europe and Japan where we have invested substantially in tools and people,” Chandrasekaran asserted.

To mark the company’s 10 years of going public, the board announced a special reward to all its employees who completed one year service.

“Employees completing one year of service will be eligible for the special reward, which will be equivalent to a week’s salary for every year of service,” the company said in a statement.

The reward will cost the IT sourcing major Rs.2,628 crore ($423 million)

“We have maintained our profitability in a challenging operating environment, where currency has been a strong headwind for some time,” chief financial officer Rajesh Gopinathan said on the occasion.

Noting that there was holistic growth across markets and industries during the fiscal under review, Gopinathan said Europe led growth in major markets, while Britain and North America grew in line with the company average.

“All major industry verticals grew in double digits led by retail, manufacturing, life sciences & healthcare and BFSI (banking, financial services and insurance) in the fiscal,” Gopinathan added.

The company made 25,000 offers on engineering campuses for trainees who will join from second quarter (July-September) of this fiscal (2015-16).

“Our attempts to build a next-gen organisation that is social, mobile, engaged and collaborative continues. We are also extending the model of using social and platform-based collaboration tools to connect with students from colleges across India and globally,” TCS’ human resources head Ajoy Mukherjee said.

TCS also crossed the milestone of employing over 100,000 women, with gender diversity of 33 percent and 122 nationalities represented in its global workforce.


TCS Bids ‘Ta-Ta’ to Fast Growth

April 17th, 2015

Shares in Tata Consultancy Services are priced for perfection. Little wonder that investors rush to part ways at the slightest sign of trouble.Outsourcing29

The information technology outsourcer posted mildly disappointing earnings on Thursday evening. In the three months to March, revenue in U.S. dollar terms fell 0.8% from the previous quarter; analysts had expected a slight increase.

That might not seem like a big miss, but investors took the news hard, sending TCS shares down 4% in morning Mumbai trading. This follows a similar episode two quarters ago, when a slight miss on top-line estimates for the September quarter sent shares down 9% in a single session.

TCS is the first of India’s major IT companies to report earnings for the March quarter. As the country’s biggest outsourcer by revenue, it is also an industry bellwether. The entire sector faces challenges from the strong dollar, as well as declining spending by energy companies in the wake of the oil-price bust.

TCS reports revenue in dollars, but gets around a quarter of its revenue from the U.K. and continental Europe. In the first three months of 2015, the pound fell 5% against the U.S. dollar, and the euro dove 12%, making revenue look worse in dollar terms. Costs are mostly in rupees, which have been stable against the dollar.

Longer term, the weaker euro will boost the competitiveness of Europe’s own IT providers such as Capgemini and Atos, notes Jefferies analyst Atul Goyal, lessening the appeal to European companies of going offshore.

Research firm Gartner sees total world-wide IT outsourcing spending falling slightly this year due in part to the drag from technology-expense cutbacks in the fossil-fuel industry. The impact on TCS won’t be huge, as energy and utility companies together account for just 4% of revenue, but it is another headwind.

The bigger issue is where TCS will find growth to underpin investor’s lofty expectations. From fiscal year 2011 to 2014, its annual profit growth averaged 21%. Those days are gone. For fiscal year 2015, which ended in March, the pace slowed to 13%.

Even that excludes the impact of a generous one-time employee bonus. Including the bonus, profit for the year was up just 2.3%. While the current fiscal year may not see such a magnanimous outlay, compensation costs are rising. TCS’s employee-attrition rate has worsened as developers increasingly hopscotch from firm to firm.

Analysts see profit growth excluding bonuses slowing to 9% for the current fiscal year. Despite this, TCS’s shares are still trading at 20 times forward earnings, in line with their five-year average. That may have made sense at one time, but not anymore.


TCS sees FY revenue growth beating industry estimates

April 17th, 2015

India’s largest software services exporter Tata Consultancy Services (TCS.NS) posted a better than expected rise in net profit led by strong worldwide client spending and said it expected revenue growth in the year starting in April to top industry estimates.An employee of Tata Consultancy Services (TCS) works inside the company headquarters in Mumbai

TCS, which has been growing revenues faster than rivals Infosys Ltd (INFY.NS) and Wipro Ltd (WIPR.NS), will benefit from investments in newer digital technologies and automation, Chief Executive N. Chandrasekaran said.

“We have laid a strong foundation for growth in FY 16,” Chandrasekaran said, adding that the company’s revenue will likely beat an industry lobby group’s estimates for the current fiscal year.

Exports by India’s IT outsourcing sector are expected to rise 12-14 percent in the current fiscal year, according to the National Association of Software and Services Companies.

TCS, which posted a 30.7 percent fall in net profit for the fourth quarter due to a one-off bonus paid to employees, had in March warned that currency fluctuations would affect its operating margins by 40 basis points.

The dollar’s biggest quarterly rise against other major currencies since 2008 has undermined sales of India’s IT services firms in non-U.S. markets, including Europe, in what is already a seasonally slow period.

TCS, part of India’s diversified Tata Group, makes about 18 percent of its revenue from Europe.

However, excluding the employee bonus payment of 26.28 billion rupees, TCS reported a net profit for the period of 57.73 billion rupees ($927.37 million). That was up 7.7 percent compared to the year-ago quarter helped by strong client spending in a seasonally slow period.

Analysts, on average, had expected the company to report profit of 54.15 billion rupees.

Shares in TCS, the largest company in India by market value, closed down 1.5 percent ahead of the results on Thursday, while the broader market closed 0.46 percent lower.


Global BPO Market in the Public Sector 2015-2019

April 17th, 2015

Research and Markets has announced the addition of the “Global BPO Market in the Public Sector 2015-2019″ report to their offering. Outsourcing28

The analysts forecast the Global BPO market in Public sector is set to grow at a CAGR of 6.0% over the period 2014-2019

BPO is a segment of outsourcing, which consists of subcontracting certain business processes of an organization to a third-party vendor that has expertise in the required domain. The Public sector refers to government services such as the military, police, public education, public transit, healthcare services as well as employees working for government organizations. The BPO services in Public sector support governments to perform various functions such as e-governance initiatives, taxation, asset registration, pensions, and welfare programs, including financial assistance for the unemployed, and in a cost-effective manner.

The Global BPO market in Public Sector can be categorized into four segments: F&A Outsourcing, CRM BPO, HR Outsourcing, and Procurement Outsourcing. This report covers information about the market share of the Global BPO market in Public sector by services and by geography.
One of the major trends upcoming in this market is the shift to omni-channel to increase the accessibility of end-consumers and to strengthen customer relationships. The omni-channel helps governments to synchronize and store detailed information about customers which eventually leads to easy tracking of complaints and customer queries.

According to the report, the Global BPO market in the Public sector is witnessing high growth because of the increased collaboration of IT services in the BPO sector. IT has facilitated the automation of various activity segments such as procurement, orders to pay, invoicing, accounts receivable, payroll outsourcing, and many others. Automation is increasingly being adopted to mitigate productivity problems and to control rising costs.

Further, the report states that one of the major challenges for the Public sector organizations is the need to spend cautiously because of market dynamics and the need to withstand budgetary pressures. These factors have forced government agencies to revise their outsourcing budgets, which eventually reduces contract sizes and number of contracts.

Key Vendors

Serco Global Services

Other Prominent Vendors

3i Infotech
Amadeus IT Group
ATS Group
HCL Technologies
NCO Financial Systems
Northrop Grumman


IT contracts worth $13 billion up for renewal this fiscal year

April 16th, 2015

Multi-billion dollar IT contracts are gearing up to be renewed. Due to this, one can expect a tough fight between Indian IT companies and global names Outsourcing26such as HP and IBM. Ovum, London-based IT research firm has made an estimate that $13 billion worth of contracts will be renewed this coming fiscal year. This will include the $3.7 billion IT outsourcing contract of NHS (National Health Service). The primary vendor of the contract is US-based CSC.

According to a Times of India report, an IT analyst at Ovum, Hansa Iyengar said a large number of these upcoming deals have a big infrastructure component. She said, “We have anecdotal evidence of Western incumbents walking out of the deals as they perceive them to be too risky for the given contract values and these are some of the deals that the Indian vendors are picking up.”

Contracts on such a large scale are usually not given to  a single entity any more, as clients choose to opt for multiple suppliers. Indian IT companies are known to lower their prices in order to win big contracts. But for this to not affect their margins, they employ automation tools as well as tweak their onsite-offshore ratios.


IT firms may post muted dollar revenue growth

April 14th, 2015

India’s software services companies may see a drop in dollar revenue growth, primarily because the dollar strengthened against other major global currencies in the three months ended 31 March, even as analysts say that these firms will fare better in the June quarter because of an expected increase in spending by clients.Outsourcing25

The major global currencies, including the euro, depreciated 4-10% against the dollar in the March quarter and this development is expected to hit dollar revenue growth of the top five IT firms by 200-250 basis points (bps)over the December quarter.

One basis point is one-hundredth of a percentage point.
Indian IT firms earn about 30-40% of their revenue in currencies other than the dollar.

In a 1 April note, Kotak Institutional Equities Research, a division of institutional broker Kotak Securities Ltd, analysts said that they expect a “muted 2-3.8% quarter-on-quarter constant-currency revenue growth for IT” in the “seasonally weak March quarter”.

Constant currency takes the average currency conversion rates from the preceding quarter.

“Organic (other than the revenue from recent acquisitions) sequential revenue growth in dollar terms is expected to be between -1% and +1% for top five IT firms,” said Hitesh Shah and Abhishek Gupta of IDFC Securities Ltd, in a note dated 28 March.

Kuldeep Koul and Bhrugesh Parsawala of the brokerage firm ICICI Securities Ltd, in a 31 March note, forecast aggregate sequential revenue growth for the top five IT vendors to be about 2.5% in constant currency terms, and about 0.2% in dollar terms “given the cross-currency headwind” of about “230 bps on an average”.

The analysts also attribute the slowing growth to deceleration in large segments like banking, financial services and insurance (BFSI), retail and energy, delays in projects taking off at the beginning of the calendar year, and the harsh winter in North America that has resulted in lost productivity.

Since IT budget cycles of clients follow the January-December cycle, and budget allocations take place in the first couple of months, IT spending picks up as the year progresses.

Ahead of its March quarter earnings announcement on 16 April, India’s largest IT software services company Tata Consultancy Services Ltd (TCS) has toned down the street expectation after its analyst briefing on 5 March. Tech Mahindra Ltd and HCL Technologies Ltd have indicated weak margins.

A Bloomberg poll of 27 analysts has estimated TCS’s sales at $3.94 billion and 26 analysts estimated profit at $867 million in the March quarter.

According to the Kotak note, HCL Technologies and TCS will lead the pack with 3.8% and 2.5% constant currency growth, while Infosys Ltd and Wipro Ltd will post another steady quarter with 2% and 2.1% constant currency revenue growth, respectively.

“Tech Mahindra would lag with flattish revenues in the CC (constant currency) terms on an organic basis (excluding the revenue from Lightbridge Communications Corp., acquired in November 2014),” said ICICI Securities’ Koul. “For Infosys, we project CC growth of 2.5% QoQ which, if delivered, will be a marked improvement from the 0.8%, -2.1%, 1.7%, and -0.4% growth in CC terms reported by the company in the fourth quarter of FY11, FY12, FY13, and FY14, respectively.”

Koul noted that Tech Mahindra’s margin could narrow by 170 bps over the preceding quarter, while HCL Technologies may see its earnings before interest and taxes (Ebit) margin decline by about 100 bps over the preceding quarter due to wage hikes coupled with the cross-currency headwinds.

Tech Mahindra’s acquisition of Lightbridge Communications Corp. and SOFGEN Holdings Ltd (acquired in early January) is also expected to contribute 5.7% (about $53 million) to reported dollar revenue growth, according to Shah of IDFC Securities.

Small and mid-cap companies are also expected to deliver weak results. According to Koul, Persistent Systems Ltd is expected to deliver dollar revenue growth of 3.5% QoQ, against the company’s prior expectation of 10%. While Mindtree Ltd and Mphasis Ltd are likely to post flattish dollar revenues, Cyient Ltd’s revenue in the dollar terms is expected to decline by 4.6% QoQ, he added.

Meanwhile, analysts are being “moderately optimistic” about the June quarter but continue to remain cautious about currency fluctuations.

“We expect management commentary to be a blend of optimism (discretionary spend in the US and outsourcing pipeline in Europe) and caution (impact of commodity price decline, volatile currencies and slower decision-making due to mixed macro indicators),” said Shah and Gupta of IDFC Securities in the note. “We expect most of the companies to indicate low-teens growth in FY16, which would be in line with software lobby body’s forecast of 12-14% for the financial year ending 31 March,” the note said.


Airbus Commits $2bn to Indian Outsourcing

April 14th, 2015

Airbus has disclosed plans to raise its outsourcing spend in India to $2 billion, shortly after Indian Prime Minister Narenda Modi visited its offices as part of an international trip to France.Outsourcing25

Modi’s trip was, in part, motivated by his desire to promote his country’s new ‘Make in India’ initiative. Airbus SAS, an aircraft manufacturing division of Airbus Group, is based in Blagnac, a suburb of Toulouse in France.

‘We are honoured to host Prime Minister Modi in Toulouse and convey to him our desire to forge a stronger industrial bond with India. India already takes a centre-stage role in our international activities and we want to even increase its contribution to our products,’ commented Tom Enders, Airbus Group CEO.


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