TCS has broken many records in the last three months — but that isn't good enough for the market

TCS has broken many records in the last three months — but that isn't good enough for the market
Tata Consultancy ServicesTCS
  • Tata Consultancy Services (TCS) share price is down by nearly 4% after markets opened today morning.
  • The company reported that net income for the quarter grew 15.6% to $1.26 billion with a wider margin of 26.8%.
  • It even declared a dividend of ₹15 a share.
  • While the numbers were impressive, they missed the street's estimates.
India's largest software exporter Tata Consultancy Services (TCS) posted its highest-ever revenue, the best growth in constant currency terms, the largest amount of new contracts, and hired the most amount of employees in any quarter. "We are making good progress in gaining share in the growth and transformation opportunity," Chief Executive Officer (CEO) Rajesh Gopinathan said in a company statement shared with the stock exchanges.

Jan-March 2021AmountRemarks
Revenue$5.9 billion4.2% in constant currency (QoQ)
Order book$9.2 billion Highest TCV in any quarter
New hires19,388Most in any one quarter
Attrition7.20%Lowest ever

The net income for the quarter grew 15.6% to $1.26 billion with a wider margin of 26.8%. The company declared a dividend of ₹15 a share. However, some reports suggest that the bottom line has been below expectations.

TCS share price is already near its all-time high. Market participants expected a good quarter as the pandemic had forced companies to digitise their operations and process at a scale never seen before. The entire Nifty IT index, which includes peer stocks like Infosys, Tech Mahindra, and HCL Tech aside from the smaller peers, gained over 6.6% in the three months ending March 2021, a lot more than the benchmark index Nifty, which went up 5.1%.
Advertisement

TCS has broken many records in the last three months — but that isn't good enough for the market
Market participants expected a good quarter as the pandemic had forced companies to digitise their operations and process at a scale never seen before. That has led to a sharp rally in IT stocks including TCS.

But, despite the impressive earnings, TCS' stock is down 4% as markets opened after earnings. "It marginally improved its EBIT margin to 26.8% . The same was below our estimate [of] 27.2% on ramp-up of large deals," Motilal Oswal in its report.

TCS has broken many records in the last three months — but that isn't good enough for the market
TCS share price this weekBI India


Advertisement

The management of the nearly TCS, with a market capitalisation of ₹12 lakh crore ($170 billion), is expecting the current upswing in business to continue. And to capitalise on the trend, the company recently got itself a millennial makeover. Here's the Chief Marketing Officer explaining the rationale for the new look TCS in an exclusive interview with Business Insider.


The largest IT player in the Indian market saw most of its growth come from continental Europe. In fact, it's the only region to have registered a positive uptake in revenue as compared to last year.
TCS has broken many records in the last three months — but that isn't good enough for the market
TCS biggest get are its clients in EuropeBI India

However, this is in line with what was expected.
Advertisement

Right before the third quarter, the company had revealed that many of the European banks and insurance companies were going through a second generation of outsourcing. Their last deals were struck over a decade ago, and the time for renewals had come around.

Hence, the massive growth seen in Europe goes hand-in-hand with jump in revenue seen from the BFSI vertical.

TCS has broken many records in the last three months — but that isn't good enough for the market
TCS' revenue earned across verticals with BFSI leading the chargeBI India

Advertisement
Retail, as well as communications, may also see an uptake in coming quarters with TCS bringing the Walgreen Deal worth $1.5 billion in February and partnering with Ericsson to build a cloud-based research and development workplace.

SEE ALSO:
Google Docs and Google Drive is down for some users around the globe, including India
Stock markets plunge by over 3.5% wiping off over ₹8 lakh crore of investor wealth – but may recover soon as per analysts
LG Wing gets a ₹40,000 price cut a week after the company shuts its smartphone business
{{}}