Tata Consultancy Service s (TCS) is seeing some sequential loss of momentum in Banking and Financial Services Solution (BFSI) business in US. The company further said it is holding back discretionary spending seen in the segment. TCS has characterized customer outlook in BFSI with utmost caution and says that it will update investors on business trends in the second quarter itself. The pressure in BFSI business, which is a major contributor (nearly 40 percent) to the business, was visible in first quarter’s growth of 1.7 percent. The company has also guided for a slower Q2 sequentially. “(We) have been expecting slower growth from the US, BFSI in particular,” says Ravi Menon of Elara Capital reacting to the above news. Federal Reserve not hiking the rate is impacting net income of banks in the US which is adding pressure on companies and could have led to this cautioning views, he told CNBC-TV18. Elara Capital expects TCS to clock in 9 percent growth for FY17. Margins are expected at 25 percent, lower than TCS’s guidance of 26 percent for the full year on back of movement in currencies. Menon says that while TCS and Infosys are trading at a premium now, the latter is expected to trade at a premium over TCS in the medium-term (mostly after 6 months). “IT stocks have been on a decline as the index rises,” says Sanjiv Bhasin of IIFL. TCS’s profit warning is negative for the entire sector and pressure is expected on largecaps and midcaps both. Previously, Mindtree and Congnizant had released profit warning. TCS might start trading at lower levels on back of this, Bhasin adds. Dipan Mehta, BSE and NSE Member, said that fundamentals of IT companies have deteriorated. Unless they get volume growth, their profit margins are going to get compressed, he said. A lot of levers of profit are disappearing for IT companies, he said, adding that it is a challenging environment. Even micaps are facing the same challenges as largcap IT companies, he said.
0 comments:
Post a Comment