India’s TCS slumps 7% on fears large deals drying up

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BENGALURU, Oct 11 (Businesshala) – Shares of India’s Tata Consultancy Services Ltd fell as much as 7% on Monday on fears that the big deals that have driven much of its growth over the past year were drying up.

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TCS, India’s largest information technology exporter, is the first among peers to report earnings for the fiscal second quarter, and its performance is seen as a gauge for the country’s $194 billion IT services sector.

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TCS on Friday recorded total contract value or orders of $7.6 billion during the second quarter, up from $8.6 billion a year ago and $8.1 billion in the June quarter.

Analysts at Ambit Capital said in a research note that with the absence of mega deals, moderation in deal wins is cautious for higher growth expectations in the medium term.

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TCS and rivals Infosys, Wipro and HCL Technologies have won large contracts over the past year from businesses investing in areas such as cloud-computing, digital payments, crypto platforms and cyber security.

Analysts at Nirmal Bang said in a note, “With large deals largely missing for the industry in the last 2-3 quarters, this situation could also be the case for Infosys after a stellar FY21 on lumpy deals. Could be too.”

“On the margin front, we are more optimistic as we believe cost pressures will peak in FY22.”

TCS indicated that though it was able to maintain margins despite challenges on the supply side, recruitment of employees and job losses, it would remain cautious as it expects them to remain so for the next few quarters.

IT companies are dealing with salary hikes, employee retention costs and high job losses as remote working has triggered a talent war in the sector.

Infosys will present its second quarter results on Wednesday.

The country’s main index for IT stocks was down 3%. ($1 = 74.9390 Indian Rupees) (Reporting by Nallur Sethuraman in Bengaluru; Editing by Soumyadev Chakraborty)

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