TCS high performers to get 14% salary hike; stock not seen reacting much

NEW DELHI: Tata Consultancy Services on Wednesday reported a profit after tax (PAT) of Rs 5,357 crore, which was in line with expectations.

Experts say although the results are what was expected the stock is unlikely to react much tomorrow (Thursday), and that there is a limited scope of significant rerating from current levels.

"The numbers are generally in line with our expectations. PAT is a bit ahead of our expectations. The stock is trading at 17 times FY16, so there is very limited scope for earnings upgrade. So, we may not see great reaction on the stock on Thursday," says Madhu Babu, IT analyst, HDFC Securities.

"I don't see a significant rerating from the current price," he says.

"We were expecting dollar revenues to grow 2% sequentially at $3.5 billion. I think the numbers are pretty much in line," says Abhishek Shindadkar of ICICI Direct.

In a post-results conference, the company said that it would hike wages in India by average 10%, while high performers can expect 14%-plus hike.

The IT giant, India's largest IT services exporter reported a profit after tax (PAT) of Rs 5,357 crore versus an ET NOW Poll of Rs 5,196 crore for the quarter ended March 2014. This is a growth of 0.8% in profit QoQ.

Sales for the fourth quarter were reported at Rs 21,550 crore versus ET NOW Poll of Rs 21,680.5 crore. Q4 EBIT came in at Rs 6,314.1 crore versus Rs 6,334.7 crore QoQ. The volumes growth came in at 2.59% QoQ and the Q4 EBIT margin was at 29.3% versus 29.7% QoQ. The net margin stood at 24.6%.

TCS said it is continuously investing to stay ahead of the curve. "We are upbeat on growth opportunities over next 12 months," the company said in a statement.

All major industry verticals grew in double-digits in FY14, said TCS. The company made offers to 25,000 engineering graduates, who are set to join in July-September.

Ahead of the results, shares of TCS closed the day at Rs 2195.00, down 2.51 per cent on the Bombay Stock Exchange. The stock hit an intra-day high of Rs 2270 and a low of Rs 2185.

The company's stock has lost over 9% in the past three months following a gradual appreciation in the rupee against major currencies, which will impact currency gains for TCS, which earns more than 90% revenue from overseas business.

In addition, the rally in the battered stocks from sectors including banking, capital goods, cement, construction, and realty has prompted investors to reduce their exposure to the IT sector.

For long-term play, most analysts still prefer TCS if compared with Infosys, which is still trading at a discount to TCS, as the company has the pedigree of delivering growth on a consistent basis and increase market share.