Major Near-Shoring Projects At Indian IT Outsourcing Firms

Some analysts believe that growth in the $76 billion Indian outsourcing industry has begun to slow because of Standard & Poor’s downgrade of the U.S. credit rating and the troubled economies in Europe. But this may not be the case. Ignoring the market conditions, the bigger players in the market are all gearing to expand their near-shore presence, a trend that they have realized cannot be ignored.

TCS’s Financials
TCS’s (BSE:TCS) Q1 revenues grew 34% over the year to $2.41 billion. Net income for the quarter came in at $532 million, growing 31% over the previous year. During the quarter, they added more than 3,575 employees to take their workforce to more than 202,190 employees. The managed to maintain utilization rates of 83.2% excluding trainees and at 76.2% including trainees.

TCS’s International Expansion
TCS recently partnered with Singapore Management University to create a new research facility to develop industry standards and IT frameworks for the emerging intelligent city model of urban development. The iCity Lab will be a digitally interactive center for city managers and planners to explore scenarios for transitioning to the cloud-based information service delivery. Through initial investment in the project, TCS will provide scholarship funds for students in the university and will be able to strengthen their presence in the city. The iCity lab will be relevant for economies like China, India, and countries in the region.

TCS’s stock is trading at Rs. 1,004.55 (~$22.07) after having touched a 52-week high of Rs. 1,350.30 (~$29.67) earlier last month. Its market capitalization stands at Rs 1,996.13 billion (~$43.86 billion).

Infosys’s Financials
Infosys (Nasdaq:INFY) revenues grew 4% over the quarter and 23% over the year to $1.67 billion. The Street was looking for revenues of $1.65 billion for the quarter. EPS of $0.67 grew 4% over the quarter and 18% over the year and managed to exceed market projections of $0.64.

The company ended the quarter with 133,560 employees after adding close to 10,000 people during the quarter.

Troubled by the shaky economy, Infosys missed the current quarter outlook. The company is projecting revenues of $1.73 billion-$1.76 billion for the quarter with earnings of $0.67-$0.68. The market was looking for revenues of $1.77 billion with EPS of $0.71. The year’s revenues of $7.13 billion-$7.25 billion with EPS of $2.88-$2.92 were in line with the market’s projected revenues of $7.25 billion and EPS of $2.92.

Infosys’s New Zealand Expansion
To continue to diversify, Infosys recently partnered with Auckland-based Gen-I, the corporate information communication technology arm of Telecom New Zealand. The partnership should help Infosys to address New Zealand-based technology opportunities for Infosys by offering a near-shore delivery center.

The stock is trading at $54.06 with a market capitalization of $30.89 billion. It touched a 52-week high of $77.92 earlier this year.

Wipro’s Financials
Wipro’s (NASDAQ:WIT) Q2 revenues grew 17% over the year and 0.5% sequentially to $1.41 billion. The Street was looking for a sequential growth of 1% for the quarter. Earnings before interest and tax from the segment grew 4% over the year to $315 million. Wipro increased its number of IT services employees by adding more than 4,100 employees during the quarter to 126,490. Attrition remained high at 23.2% for the quarter despite the company’s raising wages 12% to 15%.

For the current quarter, revenues are projected at $1.44 billion-$1.46 billion, translating to a sequential growth of 2.1%-3.5%. The market was looking for a sequential growth of 4% in the current quarter.

Wipro’s International Expansion
Wipro expanded their near-shore capabilities by launching a testing facility in Bellevue, Washington. The facility will look at providing Microsoft Lync Server 2010 qualification testing services for unified communication products and will help develop faster time to market to companies developing telephony infrastructure solutions on Microsoft’s Unified Communication platforms.

Wipro’s stock is trading at $10.35 after having touched a 52-week high of $16.81 last October. Its market capitalization stands at $25.25 billion.

HCL’s Financials
HCL’s (NSE: HCLTECH) Q4 revenues grew 5% over the quarter and 31% over the year to $0.96 million. They ended the year with revenues growing 31% over the year to $3.55 billion. Net income for the quarter grew 11% over the quarter and 55% over the year to $0.11 million. For the year, net income grew 35% over the year to $0.38 million.

HCL ended the year with nearly 77,050 employees compared with the previous year’s total of 64,560. Attrition for their IT services grew from 15.7% a year ago to 16.5% this quarter, but was lower than the previous quarter’s 17.0%. Utilization for the quarter grew from 71.9% last quarter to 72.5%.

HCL’s Near-Shore Expansion
Like others in the industry, HCL is also expanding their near-shore presence. Recently, they announced plans to add 300 jobs to their U.S. operations center based in Cary, North Carolina. The addition is expected to be completed by the end of March next year and will mean that the number of employees in the center will double.

HCL’s stock is trading at Rs 423.20 (~$9.30) with a market capitalization of Rs 291.45 billion (~$6.4 billion). It touched a 52-week high of Rs. 526.90 (~$11.58) in April of this year.