Next year likely to be better than this one — TCS management

The next financial year is going to be better than the current year ending March, India’s biggest IT services firm Tata Consultancy Services Ltd (TCS) said at an analysts’ conference.

Growth this year, however, would be slower than usual because of various factors such as uncertainty in the two main markets of the United States and Europe.

Against the 23% revenue growth (in constant currency) seen last year, this year, the number is likely to be about 15.8%, Angel Broking analyst Ankita Somani wrote in a note after attending the analyst meeting.

Actual rupee revenue growth was 31% last year as the U.S. dollar rose against the Indian currency, increasing TCS’s income. The effect of currency fluctuation would be more difficult to predict this year.

However, Somani said the company may book a forex gain of 75 crore for the final quarter of this year, while TCS had a forex related loss of 73 crore in the December quarter.

Business is looking up after a rough patch during 2012, according to indications from the company during the analyst meet. During the current quarter, pricing is expected to remain and growth is expected to be driven by volumes, she said.

“Overall, demand optimism remains intact with few pockets of weakness like telecom and hi-tech. The company expects BFSI (banking and finance) to grow in line with the company average going ahead,” Angel Broking said.

Somani said TCS was more optimistic about the coming year than the one it is leaving behind.

“Management sounded confident of FY2014 being a better year than FY2013 as clients seem to have a better handle on the kind of projects they want to execute and have made plans to spend on considering all the challenges. Healthy pipeline, broad-based deal signings and an upturn in discretionary spending, all these factors have collectively lend confidence to the company‚Äôs outlook of FY2014 being a better year than FY2013,” she wrote.

According to TCS, overall pricing in the market is stable.

Expectedly, the sentiment in the U.S. is seeing a recovery, as indicated by TCS management in the meeting.

After being in a state of uncertainty due to fears of a ‘double dip’ recession, the United States’ economy has started seeing a return of optimism in the last three to six months.

“Among geographies, the US is seeing broad-based optimism. Better outlook in the US is driven by some uptick in discretionary spending, where the demand is more project centric,” it said.

TCS also expects an improvement in the political environment to result in a more benign visa regime.

Things are tougher in Europe, which was hit by a debt crisis involving Euro partner countries such as Italy, Spain etc..

“In Europe, while the broader economy remains weak,there is increasingly greater acceptance of the outsourcing model and nature of work is largely skewed towards traditional services,” Somani said, quoting TCS.

Fourth quarter revenue growth in U.S. dollars is likely to be similar to that of the third quarter, according to indications from the company. Revenue in dollars grew 3.3% quarter on quarter in the three months ended December.