TCS, HCL Tech drop 9% each on weak earnings

TCS saw its value erode by Rs 47,000 crore

IT majors Tata Consultancy Services (TCS) and HCL Technologies on Friday witnessed their biggest single-day share price drop in five-and-a-half years, after the September quarter earnings of the two companies failed to meet analysts’ estimates. TCS shares fell 8.73 per cent to Rs 2,444.9 apiece, while that of HCL Technologies dropped nine per cent to Rs 1,505.

TCS, India’s largest company in terms of market capitalisation, saw its value erode by Rs 47,000 crore and its market capitalisation fall below the Rs 5-lakh crore-mark. Tata Sons, which owns nearly 74 per cent in TCS, saw nearly Rs 35,000 crore worth of its holding get shaved off.

HCL Technologies, too, lost about Rs 10,000 crore in market capitalisation. TCS was the worst-performing stock on the benchmark Sensex, which ended 0.4 per cent higher on Friday. Meanwhile, other software majors such as Infosys and Wipro fell 0.3 per cent and 1.1 per cent, respectively.

According to experts, the shares of TCS and HCL Tech reacted negatively as investors had built in a lot of expectations following Infosys’ strong showing last week.

After market hours on Thursday, TCS had reported a net profit of Rs 5,288 crore below analysts’ forecast of Rs 5,300 crore during the quarter ended September 2014.

Analysts fear that poor second-quarter numbers might make it challenging for TCS to achieve the revenue guidance it has set for the current financial year.

“TCS reported a rare disappointment... after several years of consistent execution. While we don’t see this slip as a sign of demand slowdown or weakening execution given the strength in digital that continues to be reiterated as a strong growth driver, we temper FY15-17 EPS (earnings per share) estimates by 3 per cent and stay BUYers,” said a note by CLSA.