TCS in a state to tackle weak macro-economic demand, Motilal Oswal maintains buy

TCS’s strong position in the market, orders, portfolio, and exposure to long term orders puts the the company in prime position to withstand the weakening macro-economic environment, said Motilal Oswal. The financial services company maintains a buy rating on TCS at a target price of Rs 3860.

Tata Consultancy Services’s (TCS) BFSI vertical secured double digit growth in FY23 despite fewer deals and weak banking demand. The Indian IT bellwether’s BFSI vertical grew 11.8 percent year-on-year in FY23. TCS’s BFSI segment made 32 percent of the company’s revenue, accounting for Rs 86,127 crore in FY23, according to the company's annual report.

Recessionary pressures in the US have led to reduced spending by companies, impacting the revenue of Indian IT companies, which heavily rely on exporting their services to the US. The situation worsened due to the banking crisis triggered by the liquidation plans of Silvergate Capital Corporation, a cryptocurrency bank, following losses from the collapse of FTX. Additionally, Silicon Valley Bank, a startup funding bank, was shut down. Furthermore, Credit Suisse, a systematically important Swiss bank, was taken over by its rival UBS.

Poor Margin Performance