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TCS Q4 – decent, but not very exciting

TCS’ fourth quarter results look decent on the fact – revenue grew 1.9% in dollar terms compared to the preceding quarter, and profit was up 2.5%.

The company blamed poor India performance in its press conference.

However, there is more to it that just poor India numbers. First, after a seasonally weak quarter in the form of the third quarter, TCS was widely expected to report a growth of at least 3 to 3.5%. Instead, it delivered 1.9%, blaming the India business.

But what it fails to add is that India business cannot explain the nearly 1.5% revenue difference because India, in all, accounts for just 6.2% of TCS’s revenue.

A closer look at the numbers reveals that TCS’s North America revenue actually performed worse than its India revenues. While India revenue grew 0.3%, North America revenue grew just 0.2%.

The company has no clear explanation for the miss, especially considering that its banking and financial services revenue grew robustly.

So what gives? While TCS’ competitor Infosys openly acknowledged that it was facing issues in manufacturing and retail, TCS has never acknowledged any such issues. Yet its quarterly numbers reveal that it faced huge pressure in these two verticals in terms of growth. Both fell quarter on quarter.

Margins fell, as expected, by 60 basis points.

All in all, not a bad set of numbers at all, but given the expectations, a tad disappointing for sure. The crucial question is, have the numbers lived up to Street’s expectations. We believe not.

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