Mahantesh Sabarad, Deputy VP-Research, SBICap Securities gave his view on whether there is a possibility of earnings per share (EPS) downgrades post June quarter and also his take on Tata Consultancy Services (TCS). TCS will come out with its June quarter numbers later on Thursday.
Below is the verbatim transcript of Mahantesh Sabarad's interview with Reema Tendulkar & Anuj Singhal on CNBC-TV18.
Anuj: What is your call on Tata Consultancy Services (TCS)?
A: We would prefer Infosys. We will wait for what the results are going to be. Last year was not entirely good for TCS. On valuation perspective it is definitely trading much higher than Infosys. So the cue that we would be essentially looking for is what kind of revenue growth they do on the topline. Revenue growth is more important right now rather than concentrating on the bottomline and the EBIT margins. So we will wait for what the topline growth would be.
Reema: What is your expectation from Q1 on the whole? Do you still think consensus expectation for this quarter are high, there is a possibility of earnings per share (EPS) downgrades post June quarter?
A: Getting to the later part of your question because we were doing a bit of a comparison of our estimates versus the consensus estimates for '16-17 and what we noticed is was FY17 which should be the year for the estimates for which we should be looking at the broader valuation of the market. So for the Nifty EPS, if I am right, the consensus is about Rs 692 or Rs 695 FY17. We are much lower. We are at around Rs 634, so that tells me that probably either we are underestimating the growth that is likely ahead in FY17 or the market is overestimating it. Given the current set of conditions that we have overall for the Indian economy with poor monsoon outlook, reforms not getting pushed through because of political deadlock or capex not reviving because of underlying inflation concerns and the Reserve Bank of India (RBI) not being so dovish about it. So we think probably the street will correct the earnings, post this results given or could happen even after Q2.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
