TCS net rises 5.8%, misses estimates
Tata Consultancy Services Ltd (TCS) missed analysts’ estimates for both revenue and profit in the fiscal fourth quarter, even as India’s largest software service firm’s full-year sales rose 6.2% to $17.58 billion.
The company reported revenue of $4.45 billion in the three months ended March 31, a 1.5% increase from the preceding quarter and 5.8% from the yearago period. Net profit totalled $992 million, a 0.8% decline on a sequential basis and an increase of 5.8% from the year-ago period.
A Bloomberg survey of 30 analysts had estimated TCS to report quarterly revenue of $4.62 billion and net profit of $1.03 billion in the quarter.
“FY17 was a year of broadbased growth amid economic and political turbulence in our key markets,” said Rajesh Gopinathan, who took over as chief executive of TCS in February. “We believe we are better placed for the year ahead,” said Gopinathan, who spent much time on the numbers, suggesting that the new CEO will take time to probably replicate the success managed by his predecessor N Chandrasekaran, the current chairman of Tata Sons.
At the heart of TCS’s underperformance is that the company’s inability to generate more business from its largest customers, banks, in its largest market, the US. TCS’s banking, financial services and insurance (BFSI) segment, which accounts for over 40% of its revenue, grew 4.8% from a year earlier in constant currency terms. North America, which brings 54% of its business, reported a 4.3% growth.
TCS does not give quarterly or annual forecasts but analysts are sceptical about the company’s prospects. The January-March quarter marks the 10th straight quarter (the company has recorded slow growth since July 2014) in which TCS has either underperformed or at best managed to keep up with estimates.
“Looking at this protracted slowdown, I believe TCS has reached to a point where unless ity really brings about a change in the way it has done business, it will be tough for the company to ever beat street expectations,” said a Mumbai-based analyst at a domestic brokerage, on the condition of anonymity.
On Tuesday, TCS shares fell 0.53% to ₹2,308.65 on BSE. The results were announced after the end of trading in Mumbai.