 "Nifty IT gains over 2%; TCS rallies 5% on strong order book, robust outlook")
Shares of information technology (IT) companies are trading higher in an otherwise weak market, with Tata Consultancy Services (TCS) shares rallying 5 per cent to Rs 4,225 on the National Stock Exchange (NSE) in Friday’s intra-day trade after the company during the December quarter (Q3FY25) recorded a healthy total contract value (TCV) of $10.2 billion, up 18.6 per cent quarter-on-quarter (QoQ) and 26 per cent (YoY). In Q1 and Q2, it was $8.3 billion and $8.6 billion, respectively.
The company declared an interim dividend of Rs 76 per share, which included a special dividend of Rs 66 per share.
The management said though the company experienced negative constant-currency growth across major geographies in Q3, they are confident about better growth in CY25 than in CY24.
Besides TCS, shares of LTIMindtree, Tech Mahindra, Wipro, Infosys, Persistent Systems, Coforge and Mphasis are also trading higher in the range of 1 per cent to 4 per cent on the NSE.
At 09:18 AM, the Nifty IT index, the top gainer among sectoral indices, was up 2.42 per cent, as compared to the 0.20 per cent rise in the Nifty 50. However, in one month, the IT index has declined 4.8 per cent, in line with the benchmark index.
TCS’s headline revenue numbers remained flat, but the deal win TCV was encouraging, signaling potential momentum pick-up ahead. Looking ahead to FY26, a recovery in discretionary client spending and a strong US economy could present a more favorable growth environment. While BSNL ramp-down is still a key risk, brokerage firm Motilal Oswal Financial Services (MOFSL) believes improving deal closing cycles and the strong TCV showing in Q3 should offset some of that impact.
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The brokerage firm, in the company's Q3 results update, said they are also encouraged by the absence of "mega deals" in Q3 TCV, suggesting a return of short-cycle deals. Overall, MOFSL believes tech spend recovery, which over the past six months was heavily reliant on BFS, is now spreading to other verticals such as Hi-tech and Retail.
TCS's Q3FY25 performance reflects a mixed bag, with modest revenue growth and solid operational metrics. Looking ahead, management’s commentary on discretionary spending recovery and improved deal cycles (vs the previous quarter) offers optimism for revenue realisation. Key will be the core markets growth trajectory (to compensate for BSNL revenue absence in H2FY26), amid inflation/economic growth conundrum. Management also maintained guidance of 26-28 per cent margin band and plans to exit FY25 at 26 per cent, ICICI Securities said in a note.