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Tata Consultancy
Starts sending out joining
dates for class of 2011; Hiring
as per plan for FY12; EW
Quick comment: No hiring deferrals for class of
2011: Our channel checks reveal that TCS has started
sending out joining dates for its new campus hires for
class of 2011. These grads were hired from campuses in
Nov-Dec 2010, and the joining dates are spread out
from Sep 2011 to Jan 2012 so far. Management’s
decision to not delay / defer joining dates for its class of
2011 is another data point indicating the resilience of the
demand environment for India IT vendors, in our view.
Investors have been expecting an imminent slowdown in
revenue growth for India IT companies. Although most
companies have been cautious on the demand
environment, the industry has not moved to operating in
crisis mode. Hiring for TCS has been on track, with
management indicating that they plan to make 60,000
gross additions for FY12.
Why are companies hiring despite the macro
worries? The top 4 India IT companies and large MNCs
give out 250-300k offers for gross additions in a year,
with 70-80% of these for engineering grads, by our
estimate. With an addressable talent pool of at best
500k engineers (50% of the total engineering grads), we
believe it is prudent for IT companies to continue hiring
to ensure intake of quality graduates in the system –
unless there is a visible disruption in the demand
environment.
Well positioned in a tough environment: As indicated
in our recent note India IT Services: Bear case
dominating mind share, but IT budgets could turn out to
be resilient, September 2, 2011 – after four years of
almost flat budgets and disciplined investing in
technology, we believe that companies in US would find
it extremely difficult to cut their tech budgets outright and
planned rationalizations could benefit India IT vendors in
our view. TCS stock currently trades at 20x FY12e and
~17x FY13e MS EPS estimates, and is the most
expensive stock in our coverage universe. We maintain our EW
rating and would recommend investors be opportunistic with
the stock at lower levels.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Tata Consultancy
Starts sending out joining
dates for class of 2011; Hiring
as per plan for FY12; EW
Quick comment: No hiring deferrals for class of
2011: Our channel checks reveal that TCS has started
sending out joining dates for its new campus hires for
class of 2011. These grads were hired from campuses in
Nov-Dec 2010, and the joining dates are spread out
from Sep 2011 to Jan 2012 so far. Management’s
decision to not delay / defer joining dates for its class of
2011 is another data point indicating the resilience of the
demand environment for India IT vendors, in our view.
Investors have been expecting an imminent slowdown in
revenue growth for India IT companies. Although most
companies have been cautious on the demand
environment, the industry has not moved to operating in
crisis mode. Hiring for TCS has been on track, with
management indicating that they plan to make 60,000
gross additions for FY12.
Why are companies hiring despite the macro
worries? The top 4 India IT companies and large MNCs
give out 250-300k offers for gross additions in a year,
with 70-80% of these for engineering grads, by our
estimate. With an addressable talent pool of at best
500k engineers (50% of the total engineering grads), we
believe it is prudent for IT companies to continue hiring
to ensure intake of quality graduates in the system –
unless there is a visible disruption in the demand
environment.
Well positioned in a tough environment: As indicated
in our recent note India IT Services: Bear case
dominating mind share, but IT budgets could turn out to
be resilient, September 2, 2011 – after four years of
almost flat budgets and disciplined investing in
technology, we believe that companies in US would find
it extremely difficult to cut their tech budgets outright and
planned rationalizations could benefit India IT vendors in
our view. TCS stock currently trades at 20x FY12e and
~17x FY13e MS EPS estimates, and is the most
expensive stock in our coverage universe. We maintain our EW
rating and would recommend investors be opportunistic with
the stock at lower levels.
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