After dismal June quarter numbers, TCS gives high hopes to investors

Growth, margin recovery expected by 4th quarter but valuations high

Investors were enthused with Tata Consultancy Services (TCS) despite its June quarter (Q1) numbers falling short of estimates. The stock closed 0.8 per cent up on Friday amid a weak market and despite a pricey valuation of 27x its FY21 estimated earnings.

In Q1, while revenue inched up 0.4 per cent YoY to Rs 38,322 crore (aided by currency movement), profit before tax declined by 10.7 per cent YoY to Rs 9,504 crore. These missed estimates of Rs 38,865 crore and Rs 9,999 crore, respectively. On a constant currency (CC) basis, revenue declined by 6.3 per cent YoY.

A weak top line