TCS Q3 earnings miss may weigh on stock marginally: Experts

Deepak Shenoy of capitalmind.in believes that the Tata Consultancy Services (TCS) numbers are not particularly impressive and might weigh slightly on the stock on Wednesday.Shenoy pointed out that the earnings growth, after factoring lower taxes paid on year-on-year basis and net of minority interest, is less than 10 percent, which is not good.  Karan Taurani of Dolat Capital echoes a similar opinion. Taurani says the quarter numbers are lower than expectation and the stock might react negatively on Wednesday. However, considering that the stock is already beaten down, he expects the downside to be limited. Below is the transcript of Deepak Shenoy, Karan Taurani  and Sarabjit Kour Nangra's interview with CNBC-TV18's Reema Tendulkar and Kritika Saxena.Reema: Anything that you would like to say on TCS results?Shenoy: Just went through some of the salient points in the results. The bet profit number seems to be a touch and go thing. The taxes they have paid this quarter in crore in rupees is lesser than they have paid in December 2014. So, the miss might, the Rs 6100 crore number is actually Rs 6083 net of minority interest, it is actually a little bit higher on paper because they have paid lower taxes in this quarter. So, I believe that once we do a change in calculation this might actually be a less than 10 percent profit growth for TCS. So, I believe that is not as positive as it initially started to look. I have not got the full fact sheet, so would like to see employee growth. I think headcount has probably increased because the utilisation has fallen and the Chennai impact is there. So, unravelling that will take a little more time but overall I might say that the profit number that was initially looking impressive isn’t quite as much right now.Reema: Your initial reading of TCS' earnings?Taurani: It is a miss on the dollar revenue and despite of the negative impact of the Chennai factored in our estimates it has come below that. It is negative overall but in terms of margin it is in line with our expectations.Reema: So, how do you expect this stock to perform tomorrow?Taurani: The stock is already beaten down in terms of performance and in the last three months also it has underperformed the broader market. So, you could see some kind of negative bias on the stock but not a huge downside from current levels.Reema: Anything in the internals which gives you comfort?Taurani: No, nothing from the prima facie look. Nothing gives me comfort as such. It is a muted quarter and slightly lower than expectations.Reema: Give us your initial reaction to TCS - between a topline miss and a bottomline beat what would be your call on the stock tomorrow?Nangra: Tomorrow it will definitely depend on many factors because as we know this quarter has been extraordinary. As it is it is a softer quarter for any IT company, more so for TCS and with Chennai thing happening I guess it has deteriorated the performance. So, I think it is a kind of extraordinary as far as I am concerned on the topline front. So, definitely it is a miss but surprisingly they have still maintained the margins. So, I need to look into volume number and other factors. I think apart from margins I think other income has played in terms of bet profit being higher than what was estimated. So, these are variables. The missing variables apart from margins and other income I guess would be volumes. So, that will complete the picture for the current quarter numbers. I think it will be viewed as extraordinary quarter. Reema: Wasn't that factored in? Didn't we know about the Chennai floods, didn’t we then not come out with our expectations?Nangra: I think probably there is a mismatch in assessment. I need to figure out how much is because of Chennai.