TCS Warns Financial Clients Delaying Spending, Shares Slide

TCS Warns Financial Clients Delaying Spending, Shares Slide

IDFC Securities has cut its earnings estimate for TCS for the next fiscal year by 3-4 per cent

Mumbai: Tata Consultancy Services Ltd (TCS) has warned that its financial sector clients in the United States are holding back on discretionary spending, sending its shares tumbling as much as 6.4 per cent to a six-month low.

The country's top software services exporter said its internal data as of end-August indicated that banking and financial services clients were being cautious and have in some cases been holding back on discretionary spending.

This has led to a "sequential loss of momentum", TCS said in a securities filing late on Wednesday.

The United States is the biggest market for India's more than $150 billion software outsourcing sector, followed by Europe.

Brokerage firm Ambit said lower revenue growth and adverse exchange rate movements would likely hurt the profitability of TCS.

It estimated revenue to grow 1-2 per cent on quarter in the three months to September, lower than the 3 per cent rise reported for the first quarter.

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IDFC Securities said in a note that it expected "downward risk" to the company's margin guidance of 26-28 per cent after the warning.

The brokerage cut its earnings estimate for TCS for the next fiscal year by 3-4 per cent due to the operational challenges.

As of 0545 GMT, TCS shares were down 5.7 per cent at Rs 2,302.20 after declining to their lowest since March 2 at Rs 2,284.75.
© Thomson Reuters 2016


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