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TCS fall below Rs 2,500, likely to face biggest fall in over 3 Months

TCS , Global Leader, Card Management and Transaction Processing, Celent

Mumbai: Tata Consultancy Services shares slumped nearly 4 per cent in opening trade on Friday tracking softness in March quarter earnings; Q4 results were announced after markets closed on Thursday.

India's biggest outsourcer reported an adjusted profit (including one-time bonus for employees) of Rs 5,906 crore (IFRS), an impressive jump of 8.5 per cent over the December quarter because of higher other income. Higher profits aided ebit or operating margin, which rose to 27.2 per cent (adjusted for one-time bonus) versus 27 per cent in the December quarter.

Excluding one-time employee bonus of Rs 2,628 crore, TCS reported a profit of Rs 3,858 crore for the January to March quarter.

Revenues dipped 1.15 per cent sequentially to Rs 24,220 crore raising demand and growth concerns. TCS' revenues, in US dollars, dipped 0.8 per cent to $3900 million, missing analysts' expectations.

Softness in TCS' topline growth hit shares of other IT companies as well. Shares of Infosys, Wipro, HCL Tech and Tech Mahindra traded lower; the IT sub-index on the BSE was down 1.6 per cent and underperformed the broader Sensex and Nifty.

TCS does not give a formal guidance, but the management said it was confident of beating Nasscom's growth estimates for 2015-16 fiscal year, cheering analysts. Chief Executive N. Chandrasekaran said the company will benefit from investments in newer digital technologies and automation.

It's for this reason that most brokerages continue to be positive on TCS despite softness in March quarter. CLSA retained its "outperform" call on the stock even as it cuts its earnings per share estimate on the stock.

Credit Suisse said Q1 FY16 growth will be an important stock trigger, while Macquarie said it will remain a buyer in TCS at lower levels. As of 09.42 a.m., TCS traded 3.6 per cent lower at Rs 2,490 on the NSE.


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