For TCS, FY17 looks like a revival year: analysts

Jefferies' Vaibhav Dhasmana and Atul Goyal say growth headwinds in FY15-16 (insurance and Europe) are now past with a likely revival ahead

For India's largest IT services provider Tata Consultancy services (TCS) which had to face major hedwinds in FY15 and FY16, analyst expect FY17 will be a better year.

"Our meeting with the company suggests some growth headwinds in FY15-16 (insurance and Europe) are now past with a likely revival ahead. Overall revenue growth should improve in FY17," said a report by Jefferies' Vaibhav Dhasmana and Atul Goyal.

TCS during the last two financial years has been facing pressure in verticals such as telecom, energy and insurance (mainly Diligenta) and in markets such as Europe, UK and Japan.

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N Chandrasekaran, CEO and MD, TCS last month had suggested that growth in insurance vertical will be back on track. "Diligenta will take one more quarter to get back on growth track.

Telecom (8.4 per cent of revenue) and energy (4.1 per cent of revenue) are likely to continue growing below company average but should have a lesser overall impact due to the smaller exposure. Europe (11 per cent of revenue) had seen a temporary slowdown which should likely revive while UK (16 per cent of revenue) ex-Diligenta should continue to grow. Visibility in Japan continues to remain low, said the Jefferies' note.

"Company believes that given some headwinds discussed earlier are now past and growth should improve from here on. This is also reflected in our 10 per cent/12.4 per cent YoY growth projections of USD revenues in FY17/18E. In the Mar-16 quarter, sequential growth could likely be similar to that in the previous years," said the note.

The management yet again reiterated that it does not see any headwinds in the BFS space, like some of its peers, Cognizant, has warned about. "In fact growth for the vertical is likely to remain resilient as it has in recent past on back of -1) Discretionary spend on digital; 2) Regulatory and risk management; 3) Simplification of legacy systems."