By Sethuraman N R and Dhwani Pandya
BENGALURU/ MUMBAI (Reuters) -India’s No.1 software services exporter Tata Consultancy Services warned about near-term softness in demand from clients despite reporting a slightly better-than-expected quarterly profit on Wednesday.
TCS is the first among its peers to report quarterly results, setting the tone for a $245 billion industry that is staring at a recession in major markets like the United States and Europe.
While the company saw large deal wins pushing its order book to $10.2 billion during the June quarter from $8.2 billion a year ago, it is worried about near-term demand amid global economic woes.
“Because of the uncertainty, not so business-critical programs are getting paused or deferred and getting re-prioritised,” TCS Chief Executive Officer K Krithivasan said in a post-earnings press conference in Mumbai.
Indian IT firms, which had gained from a pandemic-induced digital services boom, have seen clients cut or defer spending in recent months amid global macroeconomic concerns.
Some of the clients are pausing those projects that are without a clear return on investment, Krithivasan added.
While there were no major project rampdowns or cancellations in the first quarter, TCS said it was difficult to predict the recovery in demand as “clients (are) uncertain about the short term”.
Smaller rival HCLTech, which reported first-quarter results below analysts’ estimates, also echoed the same trend of reduction in discretionary spending by clients and deferred annual pay hikes by a quarter.
The consolidated net profit for TCS rose to 110.74 billion rupees ($1.35 billion) in the first quarter.
Analysts on average had expected a profit of 109.04 billion rupees, according to Refinitiv IBES data.
Revenue from operations rose 12.6% to 593.81 billion rupees.
India’s second-biggest IT services provider Infosys will report results next week, while Wipro will post quarterly numbers on Thursday.
($1 = 82.2658 Indian rupees)
(Reporting by Sethuraman NR in Bengaluru and Dhwani Pandya in Mumbai; Editing by Savio D’Souza, Nivedita Bhattacharjee and Eileen Soreng)
