TCS shares down 2%, hits 8-month low; stock down 8% thus far in February

TCS hit Rs 3,780.65, its lowest level since June 20, 2024, in Wednesday's intra-day trade; it is quoting lower for the third straight day, falling 4 per cent during the period

Shares of Tata Consultancy Services (TCS) hit an eight-month low, declining 2 per cent to Rs 3,780.65 on the National Stock Exchange (NSE) in Wednesday’s intra-day trade. The stock is quoting lower for the third straight day, falling 4 per cent during the period.  It is trading at its lowest level since June 20, 2024.

 

Thus far in the month of February, TCS has underperformed the market by declining 8 per cent, as compared to the 2.3 per cent decline in the Nifty 50 and 3.6 per cent fall in Nifty IT index.

 

TCS declared a total dividend of Rs 76 per share, including special dividend of Rs 66 per share. The company had said the third interim dividend and the special dividend shall be paid on February 3, 2025.

 

Since January 13, 2025, post the company's December 2024 quarter (Q3FY25) results, the stock price of TCS has corrected 12 per cent after it reported revenue of $7.54 billion, down 1.7 per cent quarter-on-quarter (QoQ) and up 3.5 per cent year-on-year (YoY) (in constant currency, or CC terms, flat QoQ and up 4.5 per cent YoY). 

 

Earnings before interest tax (EBIT) margin came in at 24.5 per cent, up around 40 bps QoQ despite headwinds led by operating efficiency through productivity, utilisation and pyramid improvement.

 

In a quarter that saw significant cross-currency volatility, TCS’s strong execution, cost management and deft currency risk management helped deliver healthy margin improvement and free cash flows. Disciplined investments in talent and infrastructure should lend good support to long-term business growth, the management had said.

 

Revenue growth was soft due to seasonality and softness in discretionary demand while margins improved in-line with estimates. Deal win total contract value (TCV) at $10.2 billion has shown uptick and was above the company’s normalised order TCV of $7-9 billion which is encouraging, said Mirae Asset Sharekhan.

 

The brokerage firm believes TCS remains well-positioned to capture opportunities across cost optimisation and business transformation given its strong domain knowledge, digital and gen AI capabilities.

 

According to analysts at ICICI Securities, the core markets are expected to drive revenues in CY25 and expect dollar revenue to grow by 4.6 per cent, 5.1 per cent and 8.8 per cent in FY25E, FY26E and FY27E, respectively, implying compound annual growth rate (CAGR) of 6.1 per cent between FY24-27E compared to CAGR of 8.8 per cent between FY19-24.

 

Improving discretionary spend environment coupled with healthy TCV growth positions TCS well for medium-to-long-term growth, the brokerage firm said, with a ‘Hold’ rating on the stock.