Tata Consultancy Services posted third quarter revenues at Rs 21,294 crore, up 1.5 percent sequentially and 32.5 percent year-on-year. The number was below analysts expectation. Ankita Somani, IT Analyst, Angel Broking too had expected a tad better number. But it is more or less in line, she says.
Also Read: TCS Q3 net beats street; CEO Chandra sees stronger FY15
She does not think India’s number one software exporter has surprised in the positive. Margins as well as dollar revenues came in below expectation, she adds. The silver lining for the company has been the higher than expected profit after tax (PAT), up 13 percent sequentially, which Somani believes is driven by good forex gains.
But Ravi Menon, VP - IT, Centrum Broking says the numbers are in line with expectations, except for PAT which was a pleasant surprise. He says TCS is leading the pack in terms of margins. 29.7-29.8 percent is much ahead of the peer group, he adds. "I think expectations have been very high for TCS, not beating those expectations. I guess they have come in slightly ahead of my expectations," he told CNBC-TV18.
Below is the verbatim transcript of Ankita Somani & Ravi Menon's interview on CNBC-TV18
Q: What do you make of TCS numbers?
Somani: On the rupee revenues it is more or less in line. Infact a tad lower than our expectations. They have performed very well on the bottom line front. We are waiting for the operational details for the company because that is the key to watch out for. Infosys as well as HCL Tech both of them have actually positively surprised on the operational front.
Q: Your comment on the margins?
Somani: Margins are a tad lower than our expectation. I don’t think the company has surprised positively. I believe that will not go down very well with the stock at least in the near term.
Q: In dollar terms what do you make of the figure? Let me just reiterate the number for you, USD 3438 million up by 3 percent, what do you make of this?
Somani: We were estimating the dollar numbers to be around 3.6 percent kind of sequential growth and when HCL Tech came out with 4 percent kind of dollar revenue growth the expectations for TCS also went high. However 3 percent is a bit lower than what the expectations were.
Q: What do you make of the PAT, up by 13 percent, we were expecting around 10-11 percent?
Somani: PAT is higher than expectations. I am sure that is driven by good forex gains. It was actually indicated by the management in the analyst meet that they will have good forex gains in this quarter.
Q: It appears that dollar revenue growth 3 percent, margins as well are slightly lower than our estimate of 29.7 percent. How would you read TCS Q3 earnings?
Menon: I would say pretty much in line with what we had expected except for the PAT that outperformed. PAT was a pleasant surprise. We had estimated about Rs 4,930 crore and this is about 8 percent higher than that. I think that is a positive and should be mostly forex driven. Except for that I don’t think any surprises either way. Number of additions - gross hiring is a tad lower than our expectation. We were thinking about 15,500 and the numbers have come in at 14.3 but I wouldn’t be really surprised by that. This is anyways seasonally a slow quarter. May be hiring will pick up over the next quarter.
Q: Operationally its peers Infosys as well as HCL Technologies have delivered strong performance on the margin front, they have beat street expectation. Are you a bit disappointed that TCS margins have fallen a bit sequentially? We know its seasonality but given the strong performance that its peers have reported this time around TCS has not beaten street expectations.
Menon: I must also point out that TCS is leading the pack in terms of margins. 29.7-29.8 percent is still much ahead of the peer group. Infosys margin improvements were driven by some cost cutting that they could do. I don't really see any cause for concern here. I think expectations have been very high for TCS, not beating those expectations, I guess that they have come in slightly ahead of my expectations. So, it is not something to be taken negatively.
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