Will TCS deliver on its margin promise?

Currency volatility and slowing growth could weigh on its profitability in coming quarters

A stronger rupee versus the dollar, coupled with fall in revenues of its key verticals – Banking, Financial Services and Insurance (BFSI) and Retail, impacted Tata Consultancy Services’ (TCS’) performance in the March 2017 quarter (Q4). Not only did the company lag street expectations of 1.5-2 per cent revenue growth in constant currency terms (reported growth at one per cent), but its operating profit margin at 25.7 per cent fell short of its own targeted band of 26-28 per cent. Even if one were to adjust for the currency fluctuations, the operating profit margin works out to 26.1 per cent,