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India's TCS sees stronger growth in next fiscal on higher demand

Tata Consultancy Services (TCS) Chief Executive N. Chandrasekaran listens to a question during a news conference in Mumbai January 16, 2014. REUTERS/Danish Siddiqui

By Aradhana Aravindan

MUMBAI (Reuters) - Tata Consultancy Services Ltd, India's top IT services provider by market value, expects sales growth to accelerate next fiscal year after it beat quarterly profit estimates on increasing overseas demand for outsourcing services.

Signs of economic revival in the United States and Europe, the biggest markets for India's $108 billion IT outsourcing industry, have increased demand for the services offered by TCS and its domestic rivals.

Worldwide IT spending growth is expected to accelerate to more than 5 percent in 2014 after growing last year at its slowest pace since the financial crisis, according to the International Data Corporation, a research firm.

TCS, which posted a 49.6 percent quarterly profit rise to log its fastest pace of increase in at least two-and-half years, raised its hiring target for the fiscal year that ends in March by 5,000 to 55,000, underscoring the strong outlook.

"Based on initial discussions with our customers we believe 2014 will be a stronger year for us than 2013, as customers execute their business plans in a relatively stable environment," Chief Executive N. Chandrasekaran said.

"I would say that the number of deals and the total size in terms of value of deals that we are chasing is much higher than the same time last year, than any of the quarters this year," he told reporters on Thursday at a press conference.

TCS, which counts British insurer Aviva Plc and BT Group Plc among its clients, said consolidated net profit rose to 53.14 billion rupees ($863.29 million) for the quarter ended December from 35.52 billion a year earlier.

The profit beat the average estimate of 51.3 billion rupees, according to a Thomson Reuters poll of 23 analysts. Revenue for the company, part of the diversified Tata conglomerate, rose 32.5 percent in the quarter to 212.94 billion rupees.

The results follow a stronger-than-expected 21 percent rise in profit at rival outsourcing services provider Infosys Ltd, which also raised its outlook for the fiscal year ending on March 31.

India's third largest software services provider Wipro Ltd is expected to report a 16 percent increase in its quarterly net profit on Friday.

Over the last two years, TCS has been grown faster than smaller rivals Infosys and Wipro, which have endured management revamps and strategy changes, and as it has won a bigger share of financial services outsourcing contracts.

Shares of TCS, valued at nearly $75 billion, have risen nearly 76 percent over the last 12 months, compared with a 6.4 percent rise for the main index. The stock closed down 0.1 percent ahead of the results at 2,350.30 rupees.

(Writing by Sumeet Chatterjee; Additional reporting by Tripti Kalro; Editing by Miral Fahmy and Matthias Williams)

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