TCS Sinks Nearly 5 Per Cent After Q1 Earnings; MCap Falls By Rs 54,830 Crore In Early Trade

TCS clocked a 5.2 per cent rise in the June quarter net profit to Rs 9,478 crore, restricted by the impact of annual wage hikes and promotions that took operating profit margins to multi-quarter lows

Shares of Tata Consultancy Services (TCS), India's largest software services firm, on Monday tanked nearly 5 per cent, wiping out Rs 54,830.89 crore from its market valuation in morning trade, the PTI reported.

The stock dived on Monday after the company's June quarter earnings failed to meet market expectations on Friday. The stock dipped 4.71 per cent to Rs 3,111 on the BSE, while on NSE, it fell 4.76 per cent to Rs 3,110.

TCS' market capitalisation (MCap) fell by Rs 54,830.89 crore to Rs 11,39,794.50 crore in early trade on the BSE.

TCS on Friday clocked a 5.2 per cent rise in the June quarter net profit to Rs 9,478 crore, restricted by the impact of annual wage hikes and promotions that took operating profit margins to multi-quarter lows.

The Tata Group firm, which is the first in the country's over $220 billion software exports industry to report earnings, however, said that it does not see any adverse business impact because of worries around recession in its key markets.

It reported a 16.2 per cent growth in revenue at Rs 52,758 crore for the quarter, with all the big geographies and business segments reporting strong numbers, but it was operating profit margins, which slid down to 23.1 per cent – much lower than the aspirational band of over 26 per cent – that hurt the profit growth.

Rajesh Gopinathan, TCS' managing director and chief executive officer, hinted that this is the bottom for the margins, attributing the fall to annual wage hikes and promotions, which drilled a 1.50 per cent hole.

Brokerage firm Prabhudas Lilladher said the company has missed on both revenue and margins in the June quarter results.

"Q1 FY23 operating performance was a tad below expectations," according to a research report on TCS by Emkay Global Financial Services.

Other IT stocks were also quoting lower, with frontline firms like HCL Technologies, Tech Mahindra, Wipro, and Infosys falling in the range of 2.73-2 per cent. The BSE Information Technology index was also trading lower by 2.75 per cent to 28,006.56 in the morning.

At 2.15 pm on Monday, TCS was trading at Rs 3,125.30, down 4.27 per cent on the BSE.