India's TCS to diversify to other markets amid US weakness

By Haripriya Suresh and Sai Ishwarbharath B

BENGALURU (Reuters) - India's No.1 software-services exporter Tata Consultancy Services is planning to focus more on markets such as Japan, Latin America and Southern Europe amid weakness in North America, its chief executive said.

The plan to diversify more comes after the industry leader reported its slowest quarterly profit growth since 2020, and revenue contributions from its mainstay market, North America, have declined for four straight quarters.

"I wouldn't say we are consciously reducing our North America exposure, but we are consciously increasing our play in other geographies because we want to work more in markets like Latin America, Southern Europe or Japan," K. Krithivasan said.

North America has been vital for the $245 billion Indian information technology sector, with several companies deriving over half their revenue from the region. IT clients there have been reluctant to spend on discretionary projects in recent quarters amid inflationary pressures and economic uncertainty.

That is making TCS look at other markets with a lot of headroom for growth despite language and other barriers.

For instance, Japan's revenue contribution to the Indian IT sector is "very miniscule" despite the country being the one of the largest tech spenders, Krithivasan said.

Mumbai-based TCS, which has traditionally made more money catering to clients abroad, is also zooming in on its home turf.

India contributed to 6.1% of the revenue in the latest third quarter, the highest level since the second quarter of fiscal 2018. Latin America accounted for 2.1% of TCS's revenue.

The top TCS executive is "generally optimistic" about the upcoming financial year, after many analysts called the current one a "washout" for the Indian IT industry.

Last week, Infosys tightened its annual revenue forecast, HCLTech trimmed the top end of the same metric and Wipro warned it might end the year with a revenue decline for the first time in three years.

"We believe it (fiscal 2025) could be a better year than fiscal 2024," Krithivasan said.

(Reporting by Haripriya Suresh and Sai Ishwarbharath B; Editing by Dhanya Skariachan and Christian Schmollinger)