Maintaining profit margins “a big challenge” for TCS

The chief financial officer of India’s largest IT services exporter has warned that the company will struggle to maintain profit margins as the value of the Indian rupee increases.

During the three month period ending 30 September, Tata Consultancy Services posted a 25% revenue increase to more than $2 billion and a 32% rise in net profit to $455 million.

CFO S Mahalingam said maintaining this level of profitability as the rupee appreciates is "a very big challenge, very, very, big challenge."

In October, the Indian currency hit a 25-month high against the US dollar.

Rupee inflation is an issue facing all Indian IT outsourcers, many of whom derive most of their revenues from the US.

Last week, BG Srinivas, head of manufacturing and products at TCS competitor Infosys told Information Age that the company uses several mechanisms to offset currency fluctuation and wage inflation, including raising prices. "Partly it’s been offset by productivity improvements, and partly by price increases," he said.

The CFO of Infosys, V Balakrishnan, called on the Reserve Bank of India to devalue the rupee, a tactic occasionally used in China to maintain demand for the country’s exports.

Pete Swabey

Pete Swabey

Pete was Editor of Information Age and head of technology research for Vitesse Media (now Bonhill Group plc) from 2005 to 2013, before moving on to be Senior Editor and then Editorial Director at The...

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