January 17, 2011, 11:11 PM EST

By Arijit Ghosh and Shikhar Balwani

(Adds company’s rupee forecast in second paragraph.)

Jan. 18 (Bloomberg) — Tata Consultancy Services Ltd., India’s largest software exporter, may find it “somewhat difficult” to maintain profit margins as the rupee gains toward 44 per dollar, Chief Financial Officer S. Mahalingam said.

Mahalingam, who yesterday said the company expects the rupee to average 45.07 per dollar in the current quarter, spoke in an interview with Bloomberg UTV in Mumbai today.

Tata Consultancy and its closest Indian competitor Infosys Technologies Ltd. earn a majority of their revenue from customers in North America and suffer a reduction in the repatriated value of their dollar sales when the rupee appreciates. The Indian currency, which has lost 1.8 percent versus the dollar since the start of the year after gaining 4 percent in 2010, is projected to climb to 43.70 by the yearend, according to economists’ forecasts compiled by Bloomberg.

Infosys, India’s second-biggest software maker, in October called for capping the currency’s strength, saying rupee volatility will “kill” exports. Tata Consultancy uses foreign currency forwards and options contracts to hedge for currency risk, the company said in its annual report in April.

Shares of Tata Consultancy climbed 3.5 percent to 1,177.60 rupees as of 9:31 a.m. in Mumbai trading, poised for a record close. The stock was the best performer on the Bombay Stock Exchange’s benchmark Sensitive Index, which rose 0.9 percent.

Tata Consultancy yesterday reported record third-quarter profit that rose 30 percent from a year earlier to 23.7 billion rupees ($521 million) in the three months ended Dec. 31.

The Mumbai-based company, which provides computer services and back office support to clients including Citigroup Inc. and General Electric Co., boosted revenue 26 percent in the last three months on higher demand.

–Editors: Suresh Seshadri, Garry Smith.

To contact the reporter on this story: Arijit Ghosh in Jakarta at aghosh@bloomberg.net; Shikhar Balwani in Mumbai at sbalwani@bloomberg.net;

To contact the editor responsible for this story: Hari Govind at hgovind@bloomberg.net

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