TCS shares head for biggest fall in six months after Q4 results disappoint

Shares in Tata Consultancy Services fell as much as 4.4 percent on Friday, heading towards their biggest fall since October 2014, after the company’s January-March revenue fell short of expectations.

TCS on Thursday reported a revenue growth of 1.6 percent on constant currency basis versus expectations of a 2.5 percent growth due to disappointment in telecom, insurance and energy verticals.

Money managers worry slowdown seen by India’s largest software services exporter could be an indicator of an industry-wide trend. Research firm Gartner Inc said on April 9 that worldwide IT services spending may fall by 0.7 percent in 2015.

“TCS numbers are below expectation as revenue and volumes have lagged estimates. Q4 may lead to cut is TCS estimates and thereby for market,” said Aneesh Srivastava, chief investment officer at IDBI Federal Life Insurance.

“I don’t think the premium valuations would sustain.”

TCS stock is trading at 21.4 times of one-year forward earnings, a hefty premium, compared with an average 17.2 times of its rivals, as per Thomson Reuters Eikon data.

Factoring in the fourth quarter, investment bank Citi trimmed its FY16-FY17 estimates by 2 percent and 3 percent, and lowered its share price target to 2,640 rupees. The bank continues to prefer TCS’s rival Infosys among large caps.

Infosys shares fell 0.9 percent, Wipro lost 2.3 percent, while Tech Mahindra dropped 2.7 percent and HCL Technologies fell 1.5 percent.

Reuters