TCS shares fall nearly 5 pc after Q1 earnings; mcap declines by Rs 55,471 cr

Shares of Tata Consultancy Services (TCS) on Monday fell nearly 5 percent, wiping out Rs 55,471.22 crore from its market valuation, after the company's June quarter earnings failed to meet market expectations.

The stock declined 4.64 percent to settle at Rs 3,113.25 apiece on the BSE. During the day, it went lower by 4.87 percent to Rs 3,105.85.

On the NSE, it fell 4.70 percent to end at Rs 3,112 apiece.

Its market capitalisation (mcap) tumbled Rs 55,471.22 crore to Rs 11,39,154.17 crore on the BSE.

''On a stock-specific front TCS fell by more than 4 percent as Q1 FY23 results missed estimates,'' said Mohit Nigam, Head - PMS at Hem Securities.

The country's largest software exporter TCS on Friday reported a 5.2 percent 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 company, which is the first in the country's over USD 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 percent 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, slid down to 23.1 percent – much lower than the aspirational band of over 26 percent – that hurt the profit growth.

The company's managing director and chief executive Rajesh Gopinathan hinted that this is the bottom for the margins, attributing the fall to annual wage hikes and promotions, which drilled a 1.50 percent 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 also ended lower, with frontline firms like HCL Technologies, Infosys, Wipro, and Tech Mahindra falling in the range of 4.10-1.83 percent.

The BSE Information Technology index also settled lower by 2.70 percent to 28,020.72.

The 30-share BSE benchmark declined 86.61 points or 0.16 percent to settle at 54,395.23.

''As the domestic market turned its focus towards quarterly results, the weak start of IT earnings wounded the sentiments, forcing benchmark indices to open on a weak note. However, with support from banking, metal, and energy stocks, the domestic market managed to pare its losses to close flattish,'' said Vinod Nair, Head of Research at Geojit Financial Services.