Tata Consultancy Services - Furloughs, Cross Currency Impact to Singe Q3 :: Edelweiss, link

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Tata Consultancy Services (TCS), at its analyst meet today, stated that Q3FY15, mirroring previous years’ Q3 trend, will be weak due to furloughs. The company anticipates furloughs to take a toll on retail, high tech and manufacturing; insurance and banking products will continue to remain soft. However, telecom and other smaller verticals are slightly better. Moreover, cross currency impact will dent USD revenue by 220bps, higher than earlier expected. US demand is in line, adjusted for seasonality, while Europe is slightly better. We maintain our positive outlook on TCS owing to the ensuing economic recovery in the US and improving demand from Europe underpinned by the company's robust execution capabilities.

Seasonality, cross currency to hurt Q3FY15 significantly

Q3FY15 will mirror the trend of Q3 being a seasonally weak quarter for TCS due to furloughs, which till now are looking normal YoY. Softness in insurance and banking products has sustained. On the geography front, while the North American market is in line, Europe is slightly better; in India, the strong momentum is likely to sustain.

The company also highlighted cross currency as the biggest culprit that will impact USD revenue growth by 220bps in Q3FY15. Currency impact on margins will be negligible and the company maintained its broad margin band of 26-28%. TCS anticipates other income to be slightly better than previous quarter, but interest income to be lower due to lower cash balance.

LINK
https://www.edelweiss.in/research/EdelFlash-Tata-Consultancy-Services--Furloughs,-Cross-Currency-Impact-to-Singe-Q3/27819.html