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TCS Likely to Post Tepid Growth in Q3, Shares Fall

Tata Consultancy Services (TCS), which had last month warned about revenue hit on account of Chennai floods, is expected to deliver tepid results for the three months ending December 31, 2015.
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Chennai floods will impact TCS revenues in the December quarter
Chennai floods will impact TCS revenues in the December quarter
Tata Consultancy Services (TCS) shares hit their 52-week low on Tuesday ahead of the announcement of third quarter financial results. TCS, which had last month warned about revenue hit on account of Chennai floods, is expected to deliver tepid results for the three months ended December 31, 2015.

TCS' dollar revenue is expected at $4,176 million in the December quarter, up 0.5 per cent from $4,156 million in the previous quarter, according to brokers polled by NDTV Profit.

The depreciation in the rupee against the US dollar is seen cushioning EBIT or operating margins, but they could still fall by 75 basis points to 26.3 per cent due to the drop in employee utilisation because of the Chennai floods.

TCS had earlier said that its normal business functioning in Chennai was hampered for five days because of floods. Chennai houses one of TCS' largest delivery locations comprising over 65,000 employees or nearly 20 per cent of total headcount. (Read)

TCS, India's biggest outsourcer, is seen posting a net profit of Rs 5,987 crore on sales of Rs 27,647 crore in the December quarter, according to brokers polled by NDTV Profit. That compares with a net profit of Rs 6,084 crore on sales of Rs 27,165 crore that TCS delivered for the quarter ending September 2015.

TCS has missed revenue growth estimates for five consecutive quarters and analysts have little hope for an outperformance in the December quarter, which is considered soft because of Christmas and New Year holidays and furloughs in the key markets of US and Europe.

TCS shares are down over 10 per cent in the last three months since October 13, which means that they have not only underperformed the broader Nifty (down nearly 8 per cent) but the IT index too (down 6 per cent).

TCS shares ended 1.65 per cent lower at Rs 2,324 as compared to a 0.58 per cent decline in Sensex.

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