TCS valuations too high; tough to sustain level: Equirus

Despite the high valuations of TCS, Shah tells CNBC-TV18, there will be an uptick in the stock on the back of these results. However, "We believe that the valuation TCS is demanding is very rich and the forward growth rates clearly are falling. It will ultimately mean that upside from these levels on a sustainable basis is going to be very difficult," added Shah.

Below is the edited transcript of the interview on CNBC-TV18.  

Q: TCS numbers managing to beat expectations, dollar revenue in fact exceeding expectations, your first reading of the numbers?

A: These numbers are pretty good when you compare it to what Infosys reported. But I would say that these numbers also emphasize that the industry is facing slower growth rates. Expectations have come down sharply, so we obviously get positively surprised or excited with a 3% growth.

If it's 3%, we are talking about low single digit kind of growth rates which translates to annual growth rate of may be 10-12%. At most, it could lower to mid teens and that is the key issue facing the industry.

Q: Overall macro concerns, especially from the global front are slightly shaky. In that light, how do you term the performance of the IT pack now?

A: I think the global factors are one of the issues. But we have seen these growth rates for the IT pack coming off even when the US economy was on a bit of an upswing. If you go back three quarters, essentially from the September quarter last year we have seen this downward shift in growth rates.

We believe it is not just about the global macro. It has to do with maturing of the industry and for the deflationary trends that the industry is facing along with increasing competition. We also believe that a cloud computing is having deflationary impact.

Also read: TCS may grow by mid-double digits in FY13: Angel Broking

TCS rubs salt in Infosys' wounds with strong Q1 earnings