TCS sees slightly slower third-quarter growth this year

The IT sector will grow in the final quarter of 2012, but at a slightly lowered pace, according to indications from the market leader Tata Consultancy Services Ltd (TCS.)

In an ‘analyst meeting’ in Mumbai, the company said it was not worried about missing its targets for this year. However, it guided for a sequential volume-growth of 3 to 3.5% for the three months ending December 2012. In comparison, volumes (a measure of how much business it does) grew 4.1% in the three months to December 2011.

The results will be keenly watched as the United States, the IT companies’ biggest market, is seeing a slow down in corporate spending for various reasons.

Speaking to analysts CFO S Mahalingam said many sectors had seen “furloughs” in the third quarter as was expected. A furlough is a temporary unpaid leave of some employees due to special needs of a company.

“While sectors such as hi-tech and manufacturing verticals have furloughs, this time even banking and financial services (BFS) saw a few instances of clients taking furloughs. But revenues from BFS are expected to grow despite that,” Angel Broking analyst Ankita Somani, who attended the analyst meet, quoted company officials.

The TCS management indicated that it is in the midst of assessing clients’ plans as far as 2013 budgets are concerned; early indicators call for reasonable optimism, she added. “The management will get a better picture on client budgets in January. As far as pricing is concerned, the company has not seen any irrational behavior in a consistent manner and expects pricing to remain stable,” Somani said.

However, TCS’s confidence may not mean much for other IT companies. TCS has traditionally outperformed others like Infosys Ltd, Wipro etc., who have found it difficult to keep up with TCS’s growth.