TCS hits four-month low as currency impact to hurt Q3 dollar revenue

The stock dipped 4% to Rs 2,355, its lowest level since July 21, 2014 on NSE,

Shares in Tata Consultancy Services (TCS) has dipped nearly 4% to Rs 2,355, its lowest level since July 21, 2014 on NSE, the company in an investor update has communicated for a weak revenue growth for the December quarter, arising from seasonality and pressure in its banking, financial services and insurance (BFSI) business.

TCS expects its revenue for the financial year’s third quarter ending December 31 (3QFY15) to be in line with seasonal trends. Traditionally, the third and fourth quarters are weak for information technology companies in terms of growth, due to holidays and furloughs.

It said growth in Europe revenues would be better than the company’s average, though UK was expected to be weak.

On the impact of currency, the company is expecting a slight uptick in realizations and a 10-20 basis points positive impact due to dollar strengthening. However, it expects a negative 220 basis point impact due to cross currency headwinds.

However, the company maintained its EBIT margin guidance of 26-28 %.

Analyst at Angel Broking expect the company to post a around 4% qoq US$ growth during 3QFY2015 and 4QFY2015 respectively and maintain our buy with a price target of Rs 2833.

“We continue to remain positive on TCS and believe that the current weakness in the stock is a good opportunity to buy for an investment horizon of 12 months. We maintain our Buy rating on the stock with a price target of Rs 3,100,” said analyst at Sharekhan in a client note.