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Europe driving growth; media, life sciences growing faster: TCS

TCS said smaller verticals growing better than overall average growth.

Revenue contribution from India declined marginally to 6.2 per cent in January-March quarter. Revenue contribution from India declined marginally to 6.2 per cent in January-March quarter.

India’s largest software services exporter Tata Consultancy Services today said Europe continues to “drive” growth for the USD 13.4 billion company helped by demand across verticals and service lines.

Also smaller verticals like Media & Entertainment and Travel & transportation are growing better than the firm’s overall average growth, the Mumbai-headquartered company said in a business update for the first quarter of 2014-15 fiscal.

Though, TCS does not give revenue guidance, it added that there is no change in the revenue outlook for Q1 2014-15.

“There is no change in revenue outlook (for Q1 FY 2015) compared to our last quarter’s earning. Europe continues to grow faster and India is likely to be flattish or in that range,” TCS CFO Rajesh Gopinathan said in a concall.

Outlining the global demand scenario, he said that demand in the US continues to be “fairly decent and strong”.

“Overall, growth is being driven by project-based demand in the US and outsourcing-led demand in Europe, which continues to remain unchanged. The demand in Europe is across technology and service lines,” Gopinathan added.

In January-March of last fiscal, Europe accounted for close to 29.9 per cent (which includes 17.8 per cent from the UK and 12.1 per cent from Continental Europe) of the firms revenues of USD 3.5 billion.

This is against 29.1 per cent in the third quarter of 2013-14 fiscal, which included 17.5 per cent from the UK and 11.6 per cent from Continental Europe. It had clocked revenue of USD 3.44 billion during the period.

North America accounted for 52.7 per cent and 52.2 per cent of the revenue in the third and fourth quarter of the last fiscal, respectively.

Revenue contribution from India declined marginally to 6.2 per cent in January-March quarter from 6.3 per cent in Q3 of 2013-14 fiscal.

On segment-wise growth, Gopinathan said: “In terms of segments, most of the larger verticals are likely to come in at or near the company average and smaller verticals like media, life sciences will continue to do better than company average.”

The company CFO exuded confidence in the growth in digital services in the US.

“There is pick-up in digital services in the US and there is across various forms of the service. But the underlying trend in the US continues to be increase in demand for digital technologies,” he added.

On appreciation in the Indian currency, he said: “At today’s rate the impact will be about a negative 300 basis points difference between constant currency (CC) revenue and rupee revenue. In USD terms, it will be a positive 50 basis points impact.”

Gopinathan said annual salary increments will impact the first quarter margins, which is “in line and proportionate to previous years”.

TCS said it is also amending its Depreciation Policy to reflect current regulations and the Q1 FY 2015 results will reflect a one time impact in IRFS of an additional 2 per cent charge of fixed assets.

There will also be a one time impact of a write back of 4-5 per cent of fixed assets in Indian GAAP terms, it added.

TCS CEO and Managing Director N Chandrasekaran during the fourth quarter results said: “We have maintained our momentum, improved our quality of growth, deepened our relationship with customers and expanded our presence in newer markets like Europe during the past 12 months.

“Our strategic investments including those in Digital Technologies are providing a compelling value proposition as well as helping us anticipate and shape new market trends successfully.”

 

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