Tata Consultancy Services (TCS), India’s largest IT services exporter, has given a cautious outlook for the coming quarters, stating that clients are holding back on discretionary spending. In a letter, TCS has said that it is rescheduling meetings to update investors. TCS has characterised customer outlook “as one marked by abundant caution”. The IT major has said that delay in spending impacts the banking and financial services sector. This causes sequential loss of growth momentum, the company has said.
The company’s stock has dropped as much as over 6 per cent in trade today and IDFC Securities told Reuters that a slower revenue growth momentum and cross currency impact could sap momentum for TCS after a soft first quarter. The brokerage sees a 2 per cent decline in TCS’ dollar revenue growth and flat margins for the second quarter.
TCS is not the only IT major sounding a warning bell on growth prospects. Last week, Mindtree had said it expects the second quarter revenue to be lower than the previous quarter. Mindtree sees an impact of cross-currency movements, project cancellations and slower ramp-ups in a few large clients across different verticals. Analysts expect a difficult financial year for the Indian IT sector. “Mindtree’s warnings confirms our thesis of a difficult FY17 (and most likely H1FY18) for the sector as a whole,” Emkay had said in a note.
Last month, Infosys CEO Vishal Sikka had also said that there are “uncertainties across sectors, geographies”. “We did not see the RBS ramp down coming at the start of the quarter. We are seeing softness in some clients, post-Brexit, now which was not anticipated at the start of Q2. We want to see if the RBS is a one-off case or there are more like RBS,” Sikka had said, also striking a cautious note. Infosys and Wipro had disappointed the street with their muted Q1 numbers. Both IT majors had said that they are facing unanticipated headwinds and slower project ramp-ups in large deals.