Murthy had led several initiatives to improve the performance of the Fremont, California-based company, including charging clients for business results instead of man hours, the billing method more commonly used by IT outsourcing firms.

He was forced to quit India’s second biggest software services exporter Infosys Ltd (INFY.NS: Quote, Profile, Research) in 2002 following a sexual harassment lawsuit, which was settled out of court.

Speaking to reporters after iGate announced his departure, Murthy said he had informed the company chairman about his relationship with the female employee a few weeks ago.

iGate said its investigation showed Murthy had violated the company policy by failing to report his relationship with the employee. Murthy did not violate iGate’s harassment policy, it said in a statement.

“The board’s decision was made as a result of an investigation by outside legal counsel, engaged by the board, of the facts and circumstances surrounding a relationship Mr Murthy had with a subordinate employee and a claim of sexual harassment,” iGate said in a statement dated May 20.

A company spokesman did not respond to requests for further information. Murthy was replaced with immediate effect by interim CEO Gerhard Watzinger, the statement said.

iGate and other smaller IT outsourcing services providers compete with Indian heavyweights such as Tata Consultancy Services (TCS.NS: Quote, Profile, Research), Wipro (WIPR.NS: Quote, Profile, Research) and Infosys on price to win market share.

In recent months, the company had issued advertisements in international media mocking the IT outsourcing sector’s traditional billing model.

Murthy’s billing strategy is meant to appeal to clients with less-certain budgets in a tough economy.

Frederic Giron, principal analyst at Forrester Research, said Murthy’s departure did not necessarily mean the company would abandon the changes he had spearheaded.

“While it is still unclear if initiatives … will survive under a new leadership, I would assume so, since the transformation has been underway for about 2 years,” he said.

Murthy was a rising star at Infosys and was seen by many as on track to be the company’s first non-founder chief executive before the sexual harassment lawsuit abruptly ended his tenure.

After leaving Infosys, Murthy founded a company that was bought by iGate. In 2011, he teamed up with buyout firm Apax Partners to conduct iGate’s $1.2 billion purchase of much-bigger Indian rival Patni Computer Systems.

iGate shares, and revenues, have more than quadrupled since Murthy joined the company in mid-2003, according to Reuters data. The stock has gained 4 percent in 2013, lagging the S&P 500 IT consultancy subindex, which is up 8.8 percent.

(Additional reporting by Patturaja Murugaboopathy in BANGALORE; Editing by Miral Fahmy)

Murthy had led several initiatives to improve the performance of the Fremont, California-based company, including charging clients for business results instead of man hours, the billing method more commonly used by IT outsourcing firms.

He was forced to quit India’s second biggest software services exporter Infosys Ltd in 2002 following a sexual harassment lawsuit, which was settled out of court.

Speaking to reporters after iGate announced his departure, Murthy said he had informed the company chairman about his relationship with the female employee a few weeks ago.

iGate said its investigation showed Murthy had violated the company policy by failing to report his relationship with the employee. Murthy did not violate iGate’s harassment policy, it said in a statement.

“The board’s decision was made as a result of an investigation by outside legal counsel, engaged by the board, of the facts and circumstances surrounding a relationship Mr Murthy had with a subordinate employee and a claim of sexual harassment,” iGate said in a statement dated May 20.

A company spokesman did not respond to requests for further information. Murthy was replaced with immediate effect by interim CEO Gerhard Watzinger, the statement said.

iGate and other smaller IT outsourcing services providers compete with Indian heavyweights such as Tata Consultancy Services, Wipro and Infosys on price to win market share.

In recent months, the company had issued advertisements in international media mocking the IT outsourcing sector’s traditional billing model.

Murthy’s billing strategy is meant to appeal to clients with less-certain budgets in a tough economy.

Frederic Giron, principal analyst at Forrester Research, said Murthy’s departure did not necessarily mean the company would abandon the changes he had spearheaded.

“While it is still unclear if initiatives … will survive under a new leadership, I would assume so, since the transformation has been underway for about 2 years,” he said.

Murthy was a rising star at Infosys and was seen by many as on track to be the company’s first non-founder chief executive before the sexual harassment lawsuit abruptly ended his tenure.

After leaving Infosys, Murthy founded a company that was bought by iGate. In 2011, he teamed up with buyout firm Apax Partners to conduct iGate’s $1.2 billion purchase of much-bigger Indian rival Patni Computer Systems.

iGate shares, and revenues, have more than quadrupled since Murthy joined the company in mid-2003, according to Reuters data. The stock has gained 4 percent in 2013, lagging the S&P 500 IT consultancy subindex, which is up 8.8 percent.

(Additional reporting by Patturaja Murugaboopathy in BANGALORE; Editing by Miral Fahmy)

Global banks that ship work to be processed in India, either in-house or to big IT services vendors, were already under pressure to step up oversight of back-office functions after a series of scandals last year.

Last week, U.S. prosecutors said a global criminal gang stole $45 million from two Middle Eastern banks by breaking into the two card processing companies based in India and raising the balances and withdrawal limits.

“India is exposed in two ways: The threat that the same theft could happen in India and the fact that the outsourcing industry will also get affected,” said Arpinder Singh, partner and national director for fraud investigation and dispute services at consultancy Ernst & Young.

The episode is reopening debate on banks sending work requiring a high degree of confidentiality to offshore locations.

“It is the weakest link,” said Shane Shook, an expert with U.S. cyber-security firm Cylance Inc who has helped financial firms conduct investigations into some major cyber crimes.

“I think the lesson is they need to pull back on what they’ve outsourced. When you’re giving a third party, the outsourced entity, the ability to access credit limits or cash limits of the consumers you’re managing the finances for, you’re giving up control that is your fundamental responsibility.”

India’s $108 billion IT services industry is the world’s favoured destination for outsourcing. Over 40 percent of exports by the industry are support services for the global financial sector, ranging from investment bank back-office functions to research, risk-management and processing of insurance claims.

Lured by a tech-savvy English-speaking population and wages that can be one-fifth those in the West, more than three-quarters of global banks have a direct or third-party offshore presence in India.

Indian IT firms, led by outsourcers such as Tata Consultancy Services (TCS.NS: Quote, Profile, Research) and Infosys (INFY.NS: Quote, Profile, Research), argue that security breaches are rare.

“I think if you look at the nature of the work we do and how much we do, we’ve actually had very very few incidents,” said Som Mittal, president of the National Association of Software and Services Companies, the industry lobby.

UNDERCURRENT OF HOSTILITY

Still, any perception that data may be less safe in India is unwelcome for an industry that faces an undercurrent of hostility for taking away jobs in the West, home to most of its clients.

“The threat (to security) is for real, that’s for sure,” said Parag Deodhar, chief risk officer at Bharti AXA General Insurance, the local joint venture of France’s AXA (AXAF.PA: Quote, Profile, Research).

“When people don’t take it seriously, it doesn’t help. People still take information security quite lightly, and they don’t address the weakest link, which is the people aspect.”

There has been no suggestion that anyone employed at the two card processing firms, ElectraCard Services and EnStage, is involved.

EnStage, incorporated in California but with operations based in Bangalore, handled card payments for Bank of Muscat BMAO.OM of Oman, sources have said. Bank of Muscat lost $40 million in a coordinated heist on February 19.

ElectraCard Services, based in Pune, processed prepaid travel cards for National Bank of Ras Al Khaimah PSC RAKB.AD (RAKBANK), according to sources. RAKBANK suffered a $5 million coordinated heist at ATMs around the world on December 21 last year, the U.S. indictment said.

Several industry watchers have said payment card fraud is a global problem and is not unique to India.

Two previous cases of hacking into processors of pre-paid debit cards occurred at RBS WorldPay and Fidelity National Information Services Inc (FIS.N: Quote, Profile, Research), both in the United States. The amounts involved however were less than the losses suffered by the Middle East banks.

The U.S. Federal Bureau of Investigation has said many cases of cyber-crime involving credit cards and bank fraud never get publicised.

“The notion that this will affect outsourcing to India is wrong. There is no relation. There have been bigger frauds at BPOs in the United States,” Ravi Sundaram, ElectraCard’s head of strategy and corporate services, told Reuters on Monday.

Nevertheless the breach comes after a series of other events that have tarnished the IT industry in India.

Last year, the New York state banking regulator accused London-based Standard Chartered (STAN.L: Quote, Profile, Research) of hiding $250 billion in transactions with Iran and not giving proper oversight to its back office operation in Chennai, India.

That had followed a backlash in Britain after customers of Royal Bank of Scotland (RBS.L: Quote, Profile, Research) and its Natwest unit were left locked out of their accounts for a week due to an inexperienced IT operator in Hyderabad, media reports said.

A U.S. Senate probe last year criticising anti-money laundering controls at HSBC (HSBA.L: Quote, Profile, Research) identified deficiencies in work done by its “offshore reviewers” in India, according to media reports.

While plenty of global companies are moving more functions to India, either to outsourcers or wholly-owned “captive” operations, some are moving work back home.

Costs, however, remain an over-riding factor.

“Most banks in U.S. are trying to cut costs because of recession. So they will try to outsource, not just to India but to any other country or any other company,” said Nishanth Chandran, co-founder and CEO of E-Billing Solutions, a Chennai-based company that helps merchants process payments.

“For banks, it is completely a balance between security and costs.”

(Additional reporting by Aradhana Aravindan in Bangalore, Kaustubh Kulkarni in Pune and Jim Finkle in Boston; Writing by Tony Munroe; Editing by Raju Gopalakrishnan)

Global banks that ship work to be processed in India, either in-house or to big IT services vendors, were already under pressure to step up oversight of back-office functions after a series of scandals last year.

Last week, U.S. prosecutors said a global criminal gang stole $45 million from two Middle Eastern banks by breaking into the two card processing companies based in India and raising the balances and withdrawal limits.

“India is exposed in two ways: The threat that the same theft could happen in India and the fact that the outsourcing industry will also get affected,” said Arpinder Singh, partner and national director for fraud investigation and dispute services at consultancy Ernst & Young.

The episode is reopening debate on banks sending work requiring a high degree of confidentiality to offshore locations.

“It is the weakest link,” said Shane Shook, an expert with U.S. cyber-security firm Cylance Inc who has helped financial firms conduct investigations into some major cyber crimes.

“I think the lesson is they need to pull back on what they’ve outsourced. When you’re giving a third party, the outsourced entity, the ability to access credit limits or cash limits of the consumers you’re managing the finances for, you’re giving up control that is your fundamental responsibility.”

India’s $108 billion IT services industry is the world’s favored destination for outsourcing. Over 40 percent of exports by the industry are support services for the global financial sector, ranging from investment bank back-office functions to research, risk-management and processing of insurance claims.

Lured by a tech-savvy English-speaking population and wages that can be one-fifth those in the West, more than three-quarters of global banks have a direct or third-party offshore presence in India.

Indian IT firms, led by outsourcers such as Tata Consultancy Services and Infosys, argue that security breaches are rare.

“I think if you look at the nature of the work we do and how much we do, we’ve actually had very very few incidents,” said Som Mittal, president of the National Association of Software and Services Companies, the industry lobby.

UNDERCURRENT OF HOSTILITY

Still, any perception that data may be less safe in India is unwelcome for an industry that faces an undercurrent of hostility for taking away jobs in the West, home to most of its clients.

“The threat (to security) is for real, that’s for sure,” said Parag Deodhar, chief risk officer at Bharti AXA General Insurance, the local joint venture of France’s AXA.

“When people don’t take it seriously, it doesn’t help. People still take information security quite lightly, and they don’t address the weakest link, which is the people aspect.”

There has been no suggestion that anyone employed at the two card processing firms, ElectraCard Services and EnStage, is involved.

EnStage, incorporated in California but with operations based in Bangalore, handled card payments for Bank of Muscat of Oman, sources have said. Bank of Muscat lost $40 million in a coordinated heist on February 19.

ElectraCard Services, based in Pune, processed prepaid travel cards for National Bank of Ras Al Khaimah PSC (RAKBANK), according to sources. RAKBANK suffered a $5 million coordinated heist at ATMs around the world on December 21 last year, the U.S. indictment said.

Several industry watchers have said payment card fraud is a global problem and is not unique to India.

Two previous cases of hacking into processors of pre-paid debit cards occurred at RBS WorldPay and Fidelity National Information Services Inc, both in the United States. The amounts involved however were less than the losses suffered by the Middle East banks.

The U.S. Federal Bureau of Investigation has said many cases of cyber-crime involving credit cards and bank fraud never get publicized.

“The notion that this will affect outsourcing to India is wrong. There is no relation. There have been bigger frauds at BPOs in the United States,” Ravi Sundaram, ElectraCard’s head of strategy and corporate services, told Reuters on Monday.

Nevertheless the breach comes after a series of other events that have tarnished the IT industry in India.

Last year, the New York state banking regulator accused London-based Standard Chartered of hiding $250 billion in transactions with Iran and not giving proper oversight to its back office operation in Chennai, India. Standard Chartered settled with the regulator.

That had followed a backlash in Britain after customers of Royal Bank of Scotland and its Natwest unit were left locked out of their accounts for a week due to an inexperienced IT operator in Hyderabad, media reports said.

A U.S. Senate probe last year criticizing anti-money laundering controls at HSBC identified deficiencies in work done by its “offshore reviewers” in India, according to media reports.

While plenty of global companies are moving more functions to India, either to outsourcers or wholly-owned “captive” operations, some are moving work back home.

Costs, however, remain an over-riding factor.

“Most banks in U.S. are trying to cut costs because of recession. So they will try to outsource, not just to India but to any other country or any other company,” said Nishanth Chandran, co-founder and CEO of E-Billing Solutions, a Chennai-based company that helps merchants process payments.

“For banks, it is completely a balance between security and costs.”

(Additional reporting by Aradhana Aravindan in Bangalore, Kaustubh Kulkarni in Pune and Jim Finkle in Boston; Writing by Tony Munroe; Editing by Raju Gopalakrishnan)

For years, Infosys was an industry bellwether for not just giving revenue and earnings guidance but usually exceeding it, making it an outlier in a country where very few companies offer guidance and corporate transparency is often lacking.

But several times in the past two years, Infosys has missed its own forecasts, precipitating violent stock moves that culminated in a 21 percent plunge on the day of its most recent earnings report. This has prompted some in the market to question whether the company should keep giving guidance.

“Considering that the company is unable to meet guidance, the very act of giving guidance is becoming a reason for volatility,” said Jagannadham Thunuguntla, head of research at brokerage SMC Global Securities in New Delhi.

Its latest results came with a new growth forecast that was below analyst expectations, and the one-day stock plunge was the biggest in a decade for Bangalore-based Infosys.

Only three months earlier, an unexpectedly strong December quarter sent its shares nearly 17 percent higher on the day and raised investor hopes for a turnaround. Growth at Infosys, the No.2 Indian player by revenue, has lagged rivals as it struggled to implement a strategic revamp amid difficult conditions for its clients in the United States and Europe.

“We think Infosys would have been better off not giving FY13 guidance than give one which lends itself to the worst possible interpretations,” JP Morgan analyst Viju George, based in Mumbai, wrote shortly after Infosys’ earnings report for the year that ended in March.

GRAPHICS:

Share price volatility link.reuters.com/gec67t

Revenue forecasts link.reuters.com/hec67t

In July, Infosys slashed its full-year dollar revenue target and stopped giving quarterly revenue or earnings guidance.

For the fiscal year that started this month, Infosys forecast revenue growth of 6 to 10 percent in dollar terms, a wider range than the 1 to 2 percentage points it typically gives and less than the 12 percent growth expected by several analysts.

“By giving revenue guidance so wide so as to render it meaningless and by refusing to spell out a floor for FY14 margins and, particularly, by stating that it cannot predict margins in the near term for its business, management has played to the street’s worst fears,” George wrote.

GOLDEN SILENCE?

Infosys is not the only IT company to disappoint with its outlook. Shares in third-ranked Wipro Ltd(WIPR.NS: Quote, Profile, Research) lost 8 percent after its March quarter earnings met forecasts but its revenue guidance for the current quarter lagged market expectations.

Industry leader Tata Consultancy Services Ltd(TCS.NS: Quote, Profile, Research) does not give specific guidance, but has said it expects its revenue will grow faster than the industry trade group’s forecast this fiscal year.

Infosys and some analysts argue that the company has a hard time forecasting revenue because a significant chunk of corporate customer spending on its services is discretionary.

Chief Executive S. D. Shibulal told analysts after the latest earnings announcement that it had become harder to make quarterly predictions in a volatile environment. Still, he said, “the rationale for guidance is not changed.”

Outside the IT sector, only a handful of companies, including Ranbaxy Laboratories Ltd(RANB.NS: Quote, Profile, Research), the country’s top drugmaker by sales, and leading construction and engineering company Larsen & Toubro Ltd(LART.NS: Quote, Profile, Research) give revenue guidance.

Several investors said Infosys should keep giving guidance.

“If they stop giving guidance and still deliver this type of numbers, then it will be even more negative,” said Phani Sekhar, a fund manager at Angel Broking in Mumbai, which owns Infosys shares. “The best thing for them right now is to match up to whatever they have said.”

(Graphic by Catherine Trevethan; Editing by Tony Munroe and Chris Gallagher)

For years, Infosys was an industry bellwether for not just
giving revenue and earnings guidance but usually exceeding it,
making it an outlier in a country where very few companies offer
guidance and corporate transparency is often lacking.

But several times in the past two years, Infosys has missed
its own forecasts, precipitating violent stock moves that
culminated in a 21 percent plunge on the day of its most recent
earnings report. This has prompted some in the market to
question whether the company should keep giving guidance.

“Considering that the company is unable to meet guidance,
the very act of giving guidance is becoming a reason for
volatility,” said Jagannadham Thunuguntla, head of research at
brokerage SMC Global Securities in New Delhi.

Its latest results came with a new growth forecast that was
below analyst expectations, and the one-day stock plunge was the
biggest in a decade for Bangalore-based Infosys.

Only three months earlier, an unexpectedly strong December
quarter sent its shares nearly 17 percent higher on the day and
raised investor hopes for a turnaround. Growth at Infosys, the
No.2 Indian player by revenue, has lagged rivals as it struggled
to implement a strategic revamp amid difficult conditions for
its clients in the United States and Europe.

“We think Infosys would have been better off not giving FY13
guidance than give one which lends itself to the worst possible
interpretations,” JP Morgan analyst Viju George, based in
Mumbai, wrote shortly after Infosys’ earnings report for the
year that ended in March.

In July, Infosys slashed its full-year dollar revenue target
and stopped giving quarterly revenue or earnings guidance.

For the fiscal year that started this month, Infosys
forecast revenue growth of 6 to 10 percent in dollar terms, a
wider range than the 1 to 2 percentage points it typically gives
and less than the 12 percent growth expected by several
analysts.

“By giving revenue guidance so wide so as to render it
meaningless and by refusing to spell out a floor for FY14
margins and, particularly, by stating that it cannot predict
margins in the near term for its business, management has played
to the street’s worst fears,” George wrote.

GOLDEN SILENCE?

Infosys is not the only IT company to disappoint with its
outlook. Shares in third-ranked Wipro Ltd lost 8
percent after its March quarter earnings met forecasts but its
revenue guidance for the current quarter lagged market
expectations.

Industry leader Tata Consultancy Services Ltd does
not give specific guidance, but has said it expects its revenue
will grow faster than the industry trade group’s forecast this
fiscal year.

Infosys and some analysts argue that the company has a hard
time forecasting revenue because a significant chunk of
corporate customer spending on its services is discretionary.

Chief Executive S. D. Shibulal told analysts after the
latest earnings announcement that it had become harder to make
quarterly predictions in a volatile environment. Still, he said,
“the rationale for guidance is not changed.”

Outside the IT sector, only a handful of Indian companies,
including Ranbaxy Laboratories Ltd, the country’s top
drugmaker by sales, and leading construction and engineering
company Larsen & Toubro Ltd give revenue guidance.

Several investors said Infosys should keep giving guidance.

“If they stop giving guidance and still deliver this type of
numbers, then it will be even more negative,” said Phani Sekhar,
a fund manager at Angel Broking in Mumbai, which owns Infosys
shares. “The best thing for them right now is to match up to
whatever they have said.”

(Graphic by Catherine Trevethan; Editing by Tony Munroe and
Chris Gallagher)

Wipro, whose customers include Citigroup Inc and Apple Inc, projected first-quarter revenue for its IT services business to be in a range of $1.58 billion to $1.61 billion – a decline of 0.6 percent to a rise of 1.6 percent over the previous quarter. That compares with a rise of 1 to 4 percent that analysts were expecting.

In its fourth quarter ended March 31, consolidated net profit rose 17 percent to 17.29 billion rupees from 14.81 billion rupees a year earlier, Wipro said.

That was in line with the 17 billion rupee average of 19 brokerage estimates according to Thomson Reuters I/B/E/S. Fourth-quarter revenue rose 13 percent to 96.1 billion rupees. Revenue for discontinued operations was 14.12 billion rupees.

Wipro is the last of India’s major software services providers to report results for the latest quarter.

Industry leader Tata Consultancy Services Ltd (TCS.NS: Quote, Profile, Research) on Wednesday reported profits that were roughly in line with estimates and said the company would grow faster than the industry in the current fiscal year.

Second-ranked Infosys on April 11 missed expectations with a full-year dollar-revenue forecast of 6-10 percent. That dimmed investor hopes that it will soon benefit from a strategic revamp aimed at boosting revenue from software products and consultancy-led services.

On Wednesday, fourth-ranked HCL Technologies Ltd (HCLT.NS: Quote, Profile, Research) reported March quarter profits and revenue that beat analysts’ estimates after it cut staff for the second quarter in a row.

Shares of Wipro did not trade on Friday because Indian financial markets were closed for a public holiday. (Aditional reporting by Prashant Mehra and writing by Aradhana Aravindan; Editing by Chris Gallagher)

Wipro, whose customers include Citigroup Inc and Apple Inc,
projected first-quarter revenue for its IT services business to
be in a range of $1.58 billion to $1.61 billion – a decline of
0.6 percent to a rise of 1.6 percent over the previous quarter.
That compares with a rise of 1 to 4 percent that analysts were
expecting.

In its fourth quarter ended March 31, consolidated net
profit rose 17 percent to 17.29 billion rupees ($320 million)
from 14.81 billion rupees a year earlier, Wipro said.

That was in line with the 17 billion rupee average of 19
brokerage estimates according to Thomson Reuters I/B/E/S.
Fourth-quarter revenue rose 13 percent to 96.1 billion rupees.
Revenue for discontinued operations was 14.12 billion rupees.

Wipro is the last of India’s major software services
providers to report results for the latest quarter.

Industry leader Tata Consultancy Services Ltd on
Wednesday reported profits that were roughly in line with
estimates and said the company would grow faster than the
industry in the current fiscal year.

Second-ranked Infosys on April 11 missed expectations with a
full-year dollar-revenue forecast of 6-10 percent. That dimmed
investor hopes that it will soon benefit from a strategic revamp
aimed at boosting revenue from software products and
consultancy-led services.

On Wednesday, fourth-ranked HCL Technologies Ltd
reported March quarter profits and revenue that beat analysts’
estimates after it cut staff for the second quarter in a row.

Shares of Wipro did not trade on Friday because Indian
financial markets were closed for a public holiday.

(Aditional reporting by Prashant Mehra and writing by Aradhana
Aravindan; Editing by Chris Gallagher)

Net profit rose to 10.4 billion rupees ($193 million) in its fiscal third-quarter ended March 31 from 6 billion rupees in the year-earlier period, said HCL Technologies, whose customers include Finnish mobile phone maker Nokia Oyj.

The result compared with the average forecast of 9.35 billion rupees in a survey of 16 analysts by Thomson Reuters I/B/E/S. HCL follows a July-June fiscal year.

It was also much faster than a 3 percent rise in quarterly profit at larger rival Infosys Ltd, which has been losing market share to the likes of HCL and industry leader Tata Consultancy Services Ltd (TCS). Shares of Infosys plunged 21 percent on Friday after it issued lower-than-expected revenue guidance.

TCS is due to report March quarter results later on Wednesday.

During the quarter, HCL added 37 customers. The company reduced 791 staff, taking the total to 84,403 from 85,194 at the end of the December quarter, maintaining tight control of headcount after shedding jobs in the previous quarter as well.

The future of the IT industry lies in transforming traditional outsourcing into higher-value services that solve business problems with technology innovations, Vice Chairman Vineet Nayar said in a statement.

Exports in India’s $108 billion IT outsourcing industry rose 10.2 percent in the fiscal year that ended in March, according to the National Association of Software and Services Companies (NASSCOM). The industry group expects export growth of 12 to 14 percent in the fiscal year that started this month.

(Reporting By Harichandan Arakali; Editing by Chris Gallagher)

Net profit rose to 10.4 billion rupees in its fiscal third-quarter ended March 31 from 6 billion rupees in the year-earlier period, said HCL Technologies, whose customers include Finnish mobile phone maker Nokia Oyj(NOK1V.HE: Quote, Profile, Research).

The result compared with the average forecast of 9.35 billion rupees in a survey of 16 analysts by Thomson Reuters I/B/E/S. HCL follows a July-June fiscal year.

It was also much faster than a 3 percent rise in quarterly profit at larger rival Infosys Ltd(INFY.NS: Quote, Profile, Research), which has been losing market share to the likes of HCL and industry leader Tata Consultancy Services Ltd(TCS.NS: Quote, Profile, Research). Shares of Infosys plunged 21 percent on Friday after it issued lower-than-expected revenue guidance.

TCS is due to report March quarter results later on Wednesday.

During the quarter, HCL added 37 customers. The company reduced 791 staff, taking the total to 84,403 from 85,194 at the end of the December quarter, maintaining tight control of headcount after shedding jobs in the previous quarter as well.

The future of the IT industry lies in transforming traditional outsourcing into higher-value services that solve business problems with technology innovations, Vice Chairman Vineet Nayar said in a statement.

Exports in India’s $108 billion IT outsourcing industry rose 10.2 percent in the fiscal year that ended in March, according to the National Association of Software and Services Companies (NASSCOM). The industry group expects export growth of 12 to 14 percent in the fiscal year that started this month.

(Reporting By Harichandan Arakali; Editing by Chris Gallagher)