TCS gains 1.5% as it bags $1.5 bn contract from Walgreens Boots Alliance

Tata Consultancy Services (TCS) gained over 1.5 per cent on Tuesday after the company said it has bagged a $1.5 billion (about Rs 10,650 crore) contract from pharma company Walgreens Boots Alliance, spread over a period of 10 years. Under the contract, TCS will provide managed services including application maintenance and support, required infrastructure and security operations.

At 09:45 am, the stock was trading 0.22 per cent higher at Rs 2,108 apiece on the BSE, thus paring its early trade gains. The S&P BSE Sensex, on the other hand, was trading 406.50 points or 1 per cent higher at 40,279 levels. The stock hit a high of Rs 2,137.55, up 1.63 per cent against Monday's close of 2,103.15. 

"WBA is building a scalable, sustainable and globally unified lT operating model that is focused on digital transformation, automation of service delivery and innovation," said Francesco Tinto, senior vice president, global chief information officer, WBA. "The TCS strategic partnership will enhance our ability to rapidly address evolving business needs, support large-scale global technology solutions and promote investment in truly differentiating capabilities through a modernized platform."

"We are delighted to build on our long-standing relationship with WBA and enable its growth and transformation," said Ashish Khurana, Head, Retail lndustry Solutions, TCS. "We will leverage our contextual knowledge of WBA's business ecosystem to harness the power of digital technologies to streamline and scale-up their lT operations, while helping accelerate transformational initiatives that enhance the customer experience," Khurana added. 

Prabhudas Lilladher, in its note, said this is the biggest deal in retail announced as of now by TCS. Retail accounts to 15 per cent of TCS revenues. The brokerage believes that TCS growth is dependent on two critical verticals- financial services and retail. In financial services, TCS has won a series of new logos and large deals. Demand is also strong across geos and many segments such as retail banking, mid-tier banks and insurance.

"TCS is a leader in the global IT services space with the most consistent strategy and execution resulting in market share gains and growth across cycles. We expect TCS to deliver 7.5 per cent revenue CAGR & EPS CAGR of 8.2 per cent over FY20E-22E," the brokerage said.  

The brokerage maintains its estimates and the target price of Rs 2,106 (valued at 21.5x) Sep-21 earnings. TCS is currently trading at 22.4X/20.6X for FY21E/22E EPS of Rs. 22.4/20.6 respectively.  It has maintained 'HOLD' rating on the stock.