TCS scrip on Thursday plunged over 5 per cent, knocking Rs 24,797 crore off its market valuation, as the company has warned that its financial sector clients in the USA are holding back on discretionary spends, leading to a “sequential loss of momentum”.
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“The company has characterized customer outlook as one marked by abundant caution”, said TCS, adding that clients are holding back discretionary spending.
The US is the biggest market for India’s $150 billion software outsourcing sector, followed by Europe. TCS earns 54% of its revenue from North America, and more than 40% from the banking, financial services and insurance segments. Top Indian IT companies have already started stepping up investments in new digital technologies such as automation, artificial intelligence and cloud computing, but competition from large global behemoths such as Accenture remains formidable. “For TCS and Infosys, Q2 is a high growth quarter and both the companies clock majority of incremental revenue in this quarter”. In July, Infosys had cut its annual revenue growth outlook. In a letter, TCS has said that it is rescheduling meetings to update investors. The IT major has said that delay in spending impacts the banking and financial services sector.
Analyst house IDFC Securities responded by saying that it expects “downward risk” to TCS’s margin guidance of 26% to 28%. He said that political rhetoric in election years had this effect on IT companies.
Oil and Natural Gas Corp Ltd gained 2 percent after country’s biggest exploration company on Wednesday reported better-than-expected June-quarter profit.
“The demand environment has clearly worsened in the past two months”, Ambit said.
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Shares of TCS slumped to Rs 2,287 on BSE in morning trade, down by 6.53%. This also led to a 2.49 per cent or 259.09 points fall in the BSE IT index.
