Hyderabad: Is the second-quarter financial performance of India's largest IT exporter Tata Consultancy Services (TCS) ringing alarming bells for the domestic IT industry? The answer seems to be yes as the earnings were six per cent below the forecast made by analysts. The variance beyond three per cent would be a cause for worry for investors, said a senior financial analyst. The TCS scrip may suffer a steep drop in its market capitalisation (mcap).
TCS mcap full is Rs 7.29 lakh crore, and mcap FF (free float) is Rs 1.89 lakh crore. The stock on Thursday closed at Rs1,946 on BSE. The 52-week highest was Rs 2,296 and lowest was Rs1,784.
TCS scrip may witness further fall soon, predict analysts. TCS posted an operating profit of Rs 9,361 crore for the second quarter of 2019-20 fiscal as against the forecast of Rs 9,933 crore.
The operating profit on a y-o-y basis fell 4.2 per cent. After recording double-digit growth for four successive quarters, TCS posted a single-digit growth for the second quarter. The profit margin was at a nine-month low.
What factors are influencing the IT industry in general and TCS, particularly? Double-digit growth seems to be difficult for TCS during the current financial year. Wage hike and higher visa cost put more pressure on margins. The sluggish banking and financial sector in Europe further trimmed the revenues for TCS. Retail and consumer packaged goods division also cut the revenues, observed the analyst.
The US-China trade war created more business uncertainty and impacted the IT industry, including TCS. Brexit factor eroded the spending volumes on technology in several industry verticals.
On the trailing 12-month (TTM), the revenue growth fell to 8.1 per cent in the September quarter as against the peak of 10.3 per cent in March 2018 quarter. Digital revenues fell to 28 per cent in the second quarter from 51 per cent in 2018-19 fiscal and 60 per cent September quarter in 2018.
The consolidated profit on Y-Y basis rose 1.8 per cent to Rs 8,042 crore. During the quarter, the revenues rose 5.80 per cent to Rs38,977 crore. TCS board announced a dividend of Rs 45 per share, and it includes a special dividend of Rs 40.