Meeting margin target could prove tough for TCS

Rising pricing pressure, slowing revenue growth, possibility of higher visa costs could weigh

In its post-results conference, Tata Consultancy Services (TCS) repeated it would be able to achieve operating profit margin of 26 to 28 per cent. While most view this as a positive, some are not convinced. 

"We continue to believe that limited margin levers constrain TCS's earnings growth. Moreover, the company's excellent execution and key metrics leave limited margin levers, implying limited earnings growth," says Sandip Agarwal, analyst at Edelweiss Securities. 

In fact, TCS's margin has remained between 25 and 26 per cent over the past four quarters and has not touched 28 per cent since March 2014. This figure, 29.1