The Tata Consultancy Services (TCS) share clocked its biggest single-day gain in six years of 7% on Friday, taking its market capitalisation up by Rs 42,497 crore ($6.4 billion) to Rs 6.53 lakh crore, tantalisingly close to $100 billion.
The Tata Consultancy Services (TCS) share clocked its biggest single-day gain in six years of 7% on Friday, taking its market capitalisation up by Rs 42,497 crore ($6.4 billion) to Rs 6.53 lakh crore, tantalisingly close to $100 billion. At Friday’s close, the software major’s market cap is just $1.4 billion shy of the milestone. In fact, if the rupee was a little stronger the company might have hit the mark on Friday itself. The stock witnessed a strong rally to close at Rs 3,406.40 on the BSE. This follows the company reporting its biggest ever quarterly net profit, which beat estimates on Thursday evening. TCS reported a strong sequential constant currency growth of 2%, powered by large deals. The company has also proposed a 1:1 bonus share issue to shareholders.
Scaling $100 billion would see the Indian IT bellwether join the club of the 100 most valuable companies in the world, and only the second Indian company ever to achieve that milestone — Reliance Industries had crossed this threshold in October 2007 when the rupee was trading at 39 against the dollar. The software major added an incremental revenue to the tune of $185 million sequentially in the quarter ended March 2017, its highest ever in a fourth quarter. It added $1.51 billion in incremental revenues during the year to cross $19 billion in FY18.
Kotak Institutional Equities noted, “We expect a better FY2019 and forecast constant currency revenue growth of 9.2% led by revenue recognition from large deals but partly tempered by a weak banking vertical.” The company reported a net profit of Rs 6,904 crore for the quarter ended March 2018, which beat Bloomberg’s consensus estimates of Rs 6,810 crore. While analysts had pegged revenues at near Rs 31,660 crore for the quarter, the actual top line came in at Rs 32,075 crore.
Jefferies opined that the management commentary of strong growth in retail in FY19 and green shoots in banking, financial services and insurance (BFSI) segment support its view of an acceleration in growth going forward. “We build in 8.5-10% constant currency growth over FY19-21 vs. 6.7% reported in FY18,” the brokerage said.
The reward of one free share for every shares held and recommendation of final dividend of Rs 29 per share also cheered investors. Analysts were quick at revising rating on the stock. As many as five brokerages including Morgan Stanley upgraded their ratings following the Q4 results. As of Friday, 37.3% of 51 analysts that track TCS had a “buy” recommendation on the stock, with Morgan Stanley having a one-year price target of Rs 3,650 per share. About 47% of analysts suggest a “hold”, while eight have a “sell” rating on the stock. The benchmark Sensex ended in the red, down 11.71 points or 0.03%, at 34,415.58 on Friday.