TCS says downgrade by brokerage not justified

MUMBAI, INDIA: India's top software services exporter Tata Consultancy Services (TCS), responding to a CLSA brokerage downgrade of leading Indian information technology companies, said it has not seen any weakening of demand for technology services.

"On the matter of macro worries, we are not seeing any weakening of demand. Clients continue to fund new projects and ramp-ups are proceeding smoothly," TCS said in a mail to investors in a rare response to change in brokerage ratings.

CLSA in a note on Monday downgraded TCS and No. 2 Infosys to "underperform" from "outperform" due to weaker revenue outlook and travel visa issues. It also downgraded the software sector to "underweight" from "neutral".

TCS said higher scrutiny of visa applications and increased rejection rates had been an ongoing feature of the U.S. visa process for over a year and that the country's software industry lobby group was working to address the issue.

"...this will remain an irritant but it is neither sufficiently disruptive nor an incremental negative to justify a sudden sector downgrade," said the mail seen by Reuters on Tuesday.

A TCS official with direct knowledge of the matter confirmed the content of the mail to Reuters.

India's export-driven software services companies every year send a large number of their staff to the United States, their biggest export market, using short-stay visas to work at the client locations.

CLSA had said visa rejection rates in the Unites States was running at about 40 percent, up from 5 percent 18 months ago, that could make Indian information technology companies unable to staff projects on time.