Shares of India's largest IT behoemoth Tata Consultancy Services plunged on Friday, after the firm reported tepid Q2 results.
Shares of India’s largest IT behoemoth Tata Consultancy Services plunged on Friday, after the firm reported tepid Q2 results. TCS share price plunged by more than 3.7% to hit the day’s low at Rs 1,929 on BSE. TCS reported a 1.7 % on-year rise in net profit to Rs 8,042 crore for the quarter ended September of FY20, falling short of street estimates. The firm had reported a profit of Rs 7,901 crore in the July-September quarter of FY19. CNBC TV18 and ET Now had expected TCS second quarter net profit at above Rs 8,300 crore. The company recorded a revenue surge of 5.7% to Rs 38,977 crore in the second quarter as against the corresponding quarter of the last fiscal. The revenue stood at Rs 36,854 crore in Q2 of FY19.
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Taking stock of the reported results, global firm Morgan Stnaley said that Q2 revenue growth, PAT, and margin was weaker than estimate. The firm’s earlier guidance of double-digit growth for FY20 seems unachievable. Morgan Stanley has cut estimates as H2 looks tough and management has low visibility. The global firm has maintained an equal-weight on the shares with a target price of Rs 1,980. Credit Suisse said that TCS has reported a 7% EBIT miss to estimate. The larget negative surprise has come on the margin front. TCS has failed to recoup margin sequentially after a wage hike in Q1. While TCS is a high quality franchise, it is not immune to an uncertain environment, said Credit Suisse. Credit Suisse has a target price of Rs 1,930 on TCS.
“We ended the quarter with steady growth despite increased volatility in the financial services and retail verticals. We remain confident as the medium and longer term demand for our services continues to be very strong, as evidenced by our Q2 order book-the highest in the last six quarters,” Rajesh Gopinathan, Chief Executive Officer and Managing Director of TCS noted.
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