TCS Share Falls On Revenue Growth And Profitability Concerns
Priyanka Kumari / 19 Mar 2014
The stock price of Tata Consultancy Services, the largest Indian IT player in listed space, dropped by 5% today during the early trading session from the previous close of Rs 2122. The worry of analysts about the slower growth rate in Q4FY14E is the reason behind the price fall.
The stock price of Tata Consultancy Services (TCS) dropped by 5% in today’s (March 19, 2014) early trading session from the previous close of Rs 2122. The drop is seen on the concerns of the management over slower growth in Q4FY14E. The analyst meeting was presided by Rajesh Gopinathan, CFO on March 18, 2014.
After Infosys, it’s TCS that has shown its woes for the coming quarter performance. Few days back, Infosys management, N.R. Murthy (chairman), S.D. Shibulal (CEO and MD) and Rajiv Bansal (CFO), expressed their concerns over the company's performance in an investors meet held on March 12, 2014. The meeting resulted in the drop of its stock price by more than 7% on March 13, 2014.
In the TCS mid-quarter analyst meet, the management assumes both revenue and the EBIT margin to remain weak, over the past quarter in FY14. It expects the EBIT margin to drop by 40-50 basis points for Q4FY14E. It is based on the higher ongoing investment by the company. For the third quarter of FY14, the EBIT margin for TCS stood at 29.7%.
The management indicated that along with the weaker revenue growth from international market in Q4FY14E, the domestic market revenues is also likely to be lower on account of a slowdown in the business environment and on the upcoming general elections. However, the management is optimistic on the growth prospects for the financial year 2014-15. It assumes, FY15 to remain stronger on both revenue and margin front as compared to FY14, on account of strong growth expected from the Europe market, supported by the inline growth in the US and UK markets. As per NASSCOM guidelines, the Indian IT sector will grow at 13-15% in FY15E. Contrary, along with the weaker growth in Q4FY14E, Infosys management expecting a slower start for the first half of the financial year 2014-15.
TCS being the largest Indian IT player in listed space has consistently posted good set of numbers in the past. Its stock price is currently trading at a current PE ratio of 28.6x of EPS
Rs 71.05.
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