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Tata Consultancy posts better-than-expected profit

MUMBAI (NewsRise) -- Tata Consultancy Services, India's largest software exporter, posted a better-than-expected third-quarter profit, helped by a surge in demand for new digital technology services.

Tata Consultancy, known as TCS, said net income grew about 11% to 67.78 billion rupees ($997million) in the quarter ended in December from 61.10 billion rupees a year earlier. Revenue increased 8.7% in rupee-terms to 297.35 billion rupees.

Analysts had expected the company to report a profit of 64.85 billion rupees on revenue of 295.85 billion rupees.

In dollars, revenue expanded just 0.3% sequentially as year-end client shut downs and currency fluctuations weighed on the company.

"All our industries are doing very well," Chief Executive N. Chandrasekaran told reporters. The company faced "some softness" in the communications business in Europe and healthcare industry in the U.S., he said.

Revenue from new digital businesses grew more than 30%. Chandrasekaran said the company is "well-positioned" to address the opportunities in digital business.

TCS, the first to report quarterly earnings among Indian IT companies, had in October said its performance in the second half of the fiscal year, a seasonally weak period with fewer working days, will be better than the usual years.

The Mumbai-based company, backed by the $109-billion salt-to-software conglomerate Tata Sons, has been growing at a slower pace over the last two years as it grappled with cooling demand among insurance clients as well as weakness in Japanese and Latin American markets.

On Thursday, Chandrasekaran said TCS' troubles have all "bottomed out."

"Broadly, we believe that all our industries, services, geography markets are doing well. We feel pretty positive from where we are."

Still, persisting macroeconomic uncertainties remain a major overhang on TCS' prospects. Global enterprises are tightening investments, cautioned by Britain's vote to exit the European Union and the surprise outcome of the U.S. elections last year. In November, India's main software trade body slashed its annual dollar revenue growth forecast for the sector to 8% to 10% from 10% to 12%, barring currency fluctuations.

The $108 billion industry's woes are compounded by a dramatic shift in the way global businesses buy technology, as they seek new-age Internet computing software rather than stock IT application services of the past.

Indian software companies are bracing for tighter visa rules in the aftermath of Donald Trump assuming power in the U.S., the largest outsourcing market in the world. Last week, a U.S. lawmaker introduced a bill seeking to raise the required salaries for jobs offered under the skilled-worker, or H-1B, visa.

"The set up for 2017 is promising with early indications of stronger financial services spending and initial signs of integrated digital contracts, but is counterbalanced by possible delays in budgeting in select verticals," Kotak Institutional Equities said in a note last month. "Likely changes to visa rules will be the key element to focus on in fiscal year 2018."

TCS expects the U.S. to bring about more such curbs on the number of work-visas issued or even charge higher fees on such permits. The company said it has already made changes to its business model to cut down reliance on visas.

Smaller rival Infosys is set to report its third-quarter results on Friday.

Ahead of the results, TCS shares gained 0.87% in Mumbai trading on Thursday. The benchmark S&P BSE Sensex closed up 0.39%.

--Dhanya Ann Thoppil

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