JOIN USTCS sees dip in Q2 operating margin
India’s largest software exporter Tata Consultancy Services (TCS) expects that the company’s operating margins will dip slightly during the second quarter of fiscal 2013.
In an analyst briefing hosted by Chief Financial Officer and Executive Director S Mahalingam and Head of Investor Relations Kedar Shirali, TCS said that fresher joining, ramp up of projects from India and APAC geography which are of lower margins and marginal shift to onsite for new deal starts will slightly lower their margin in the coming quarter.
The company believes that all these are likely to absorb gains coming in from rupee depreciation against the dollar.
TCS has also decided to invest the benefits of rupee depreciation in pursuing lower-margin strategic deals that may not have met its margin threshold earlier. “Margins of companies like HCL and mid-tier firms like Tech Mahindra would likely be affected owing to wage hikes, but there is definitely no concern for Infosys as there have been no hikes,” Angel Broking analyst Ankita Somani told Deccan Herald.
In the analyst meet, TCS said that it is on track to meet its full-year plan shaped in April 2012 of growing faster than Nasscom’s estimate of 11-14 per cent (on constant currency basis). The company does not see any major project cancellations or change in customers’ decision making process or budgets.
“We believe TCS is likely to deliver a 4.5-4.8 per cent quarter-on-quarter volume growth in Q2 fiscal 2013 as compared to 5.3 per cent in Q1 fiscal 2013 as it included ramp up from Friends’ Life acquisition deal,” Angel broking said in a report.
It also feels unfavourable cross currency movement is expected to negatively impact dollar revenue growth. “We believe revenue growth could be in the range of 4-4.5 per cent Q-o-Q,” Angel Broking added.
TCS has informed that onboarding of its current batch of freshers is on track, but the company is yet to take a decision on its hiring target for next year. Somani added that for Wipro which has already given a wage-hike, the drop in margins will fully reflect in the quarter ended September 30, 2012. TCS stocks on BSE fell Rs 40.50 or 3 per cent to Rs 1,300 at the end of Tuesday’s trading hours.