Tata Consultancy Sales to Rise 20% Annually, Mahalingam Says

May 12, 2011, 1:04 AM EDT By Ketaki Gokhale

(Updates with shares price in fifth paragraph.)

May 12 (Bloomberg) -- Tata Consultancy Services Ltd., Asia’s largest computer-services provider by value, said its annual sales may expand at least 20 percent a year in the “foreseeable future” as companies outsource more contracts.

Demand for mobile, radio-frequency identification and social-networking applications will drive revenue growth, Chief Financial Officer S. Mahalingam, 63, said in a May 10 interview in Mumbai, where the company is based. Cloud-computing services for small- and medium-sized businesses will also spur growth, he said.

Such growth would help Tata Consultancy double sales every four years as it scales up operations and challenges rivals including Accenture Plc in winning larger outsourcing orders from global customers. Analysts estimate the Indian software exporter’s revenue will rise 25 percent this fiscal year after climbing 24 percent the previous year.

“The bigger you are, the better you’ll be at getting shortlisted” for contracts, said Richard Nguyen, an analyst at Societe Generale in Paris. “Lots of clients are shortening their supplier lists.”

Tata Consultancy fell 1 percent to 1,128.25 rupees at 9:56 a.m. in Mumbai trading. The shares have fallen 3.2 percent this year, compared with a 9.7 percent drop in the benchmark Sensitive Index of the Bombay Stock Exchange.

Worldwide spending on information technology outsourcing by businesses and governments will gain 7.1 percent this year to $254 billion after rising 2.8 percent last year, Cambridge, Massachusetts-based Forrester Research Inc. said in January.

70,000 Workers

Tata Consultancy added about 70,000 workers in the year ended in March as customers send more network maintenance and other computer technology work to India to benefit from the nation’s low-cost advantage.

By comparison, Accenture had revenue of $23.1 billion in the year ended in August 2010, almost unchanged from the previous year. Sales for the Dublin-based company fell 8.5 percent in the year ended in August 2009.

Accenture’s sales this year may reach $25 billion, according to the average of 17 analyst estimates compiled by Bloomberg. Tata Consultancy’s revenue may rise 25 percent to 466 billion rupees in the year ending in March 2012, according to the average of 52 analyst estimates.

“This kind of growth is feasible, at least for the foreseeable future,” Mahalingam said. “If you were to look at the available market, it continues to expand, because the needs of almost all companies are becoming technology-driven.”

Cloud Computing

Tata Consultancy has invested “a lot of money” to develop its cloud-based services and applications for small and medium- sized enterprises, Mahalingam, who joined the company in 1970 as a consultant, said.

Cloud computing services, where a shared pool of resources including servers and data storage is operated by contractors, were estimated to be 10.2 percent of the spending on external information technology services last year, according to a worldwide survey by Gartner, Inc.

Tata Consultancy may also seek acquisitions of smaller technology companies to gain intellectual property and new customers in non-English speaking countries, Mahalingam said.

--Editor: Vipin Nair

To contact the reporter on this story: Ketaki Gokhale in Mumbai at kgokhale@bloomberg.net

To contact the editor responsible for this story: Young-Sam Cho at ycho2@bloomberg.net

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