TCS stumbles amid economic concerns

livemint.com:

MUMBAI : Tata Consultancy Services (TCS) Ltd kick-started the fiscal second-quarter earnings season for the technology services industry on a disappointing note, with both revenue and profit falling short of analysts’ expectations. Worryingly, TCS’s dollar revenue slip in the September quarter comes on the back of a 0.4% sequential growth in the preceding three months, implying that the country’s largest technology services company added $779 million in incremental revenue in what is a seasonally strong first six months of the fiscal year. This translates into a 5.7% dollar revenue growth in the April-September period for TCS.

Given the flurry of holidays in the second half of the fiscal year, translating into fewer days IT services firms can bill clients, TCS runs the risk of revenue sequentially declining in the third and fourth quarters, resulting in the company’s overall growth slowing to less than 5% and among the weakest full-year growth in its history. India’s largest software services company is grappling with slowing growth as clients cut back on spending amid high interest rates and military conflicts in Ukraine and West Asia. The TCS board on Wednesday also approved a share buyback for up to ₹4,150 apiece, a 15% premium to Monday’s closing price of ₹3,610.2 a share.

The share repurchase, the fifth in the past six years, will cost the company around ₹17,000 crore. The earnings were announced after the end of trading in Mumbai. On Wednesday, the stock fell 0.52%, underperforming the benchmark Sensex’s 0.6% gain.