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TCS – Bellwether of Indian IT Industry Flies High

July 18, 2011

TCS posted revenue of US$2,412mn, up 7.5% qoq, majorly led by volume growth. 7.5%QQ up-tick in volumes was the key driver of TCS’ 7.5%QQ growth in $-revenues. The key surprise was the strong growth in telecom vertical (+14.3%QQ) c.f. declines seen at Infosys and also the fact that none of TCS’ clients were postponing outsourcing decisions makes us wonder what Infosys Management is upto 🙂

TCS saw growth, which was BFSI dependent, is now broad-based across verticals, geographies and service offerings; (2) increasing participation and win rate in large transformation deals. TCS signed 10 large deals during the quarter. TCS also signed a few deals and has a strong deal pipeline in the European geography and (3) willingness of clients to spend on large transformation projects.

Over and above the total headcount, TCS uses business associates (sub-contractors), now at 3-4% of its total employee base. Management indicated that the overall pricing environment remains stable; it is able to get price improvements for new contracts and contract renewals TCS has not seen any delays in decision-making so far by its clients. Strong growth in emerging markets helped telecom revenues during the quarter. Management, however, expects telecom revenues to remain volatile over the coming quarters.

Here are various Financial Institutions FY 12 EPS and 12 Month Share PriceTarget for TCS,

BOFA MERRILL Rs 53 and a target of Rs 1400
Nomura – Rs 53 and a target of Rs 1260
Goldman Sachs Rs 53.5 and a target of Rs 1260
CLSA – Rs 53 and a target of Rs 1100

Angel Broking Rs 53 and a 12 Month Target Price of Rs 1360
Kotak Rs 54.5 and a target of Rs 1350
ENAM – Rs 53 and a target of Rs 1371

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