After 23 years, India has a new numero uno when it
comes to profitability. Information technology major Tata Consultancy Services
(TCS) posted a net profit of Rs 5,328 crore for the quarter ended December,
overtaking Reliance Industries Ltd. The oil-to-telecom behemoth saw its profit
dip to Rs 5,256 crore -its first decline in nine quarters -as falling crude
prices hurt its core business. Though these figures are only for one quarter,
it is still a significant moment as it's the first time an IT company has
topped the profit charts. RIL itself had overtaken the previous leader, Tata
Steel, on the back of changes in the economy unleashed by the reforms. “Being
the best growth company in an industry with huge growth potential, the
performance of TCS is one that is sustainable in the long run,“ Shashi Bhusan,
senior research analyst at Prabhudas Lilladher said. Analysts said that though
the outlook for the commodities sector in general and crude in specific is
currently subdued, TCS grabbing the top spot underlines the emergence of the IT
sector as force undeterred by macro-economic concerns and business cycles.
Commenting on the third quarter performance, TCS CEO N Chandrasekaran said, “We
have maintained our momentum in a traditionally weak quarter for the IT
industry . Based on our progress this quarter, we are well on our way to post
industry leading growth for FY15.“ Reliance acknowledged that oil prices have
approached the `shut-in' zone and below $40barrel, the quantity of oil would
fall below production costs. Industry experts added that global demand and
currency movements are the main factors that have been deciding the fortunes of
tech players and both these aspects are seeing a favourable turn. “The inherent
balance sheet strength of TCS commands a greater valuation and the sectors that
it primarily caters to also hold it in good stead,“ said Mayuresh Joshi, VP,
Institution at Angel Broking. Research firm Gartner's `Worldwide IT Spending
Forecast', which is a leading indicator of technology trends, has forecast a
2.4% increase in global IT spending in 2015 compared to 2014 and expects it to
reach a total of $3.8 trillion. On the other hand, energy consultant, Facts
Global Energy (FGE), expect a possibility of crude prices heading towards $40bbl
in early 2015, as per their oil market update of January 2015.
