TCS needs more deals to touch 2-digit growth

Mumbai | Bengaluru: Tata Consultancy Services will need a few more large deals to deliver double-digit growth rates in the ongoing fiscal year, analysts said, despite a recent $600 million deal with GM and others with NXP Semiconductors and Cisco.
CEO Rajesh Gopinathan has said the second quarter would be crucial to maintaining double-digit growth this year.

“TCS had a 3.2 % growth in Q2 last year and we expect a similar boost with this and other deals in 2Q20. If TCS is able to follow the same growth rate for each quarter like last year, it is very likely it could touch a double-digit revenue mark,” said Mrinal Rai, principal analyst at ISG, a global technology research and advisory firm. “However, following similar growth rate for rest of the quarters (like last year) would require TCS to sign more decent valued deals in upcoming quarters.”

Analysts have pegged the deal with General Motors at around $600 million for the next five years, which works out to about $120 million a year for the company’s topline. Some analysts said achieving double-digit growth rates may be hard in the current business environment. “They would need to grow 4% in the second-quarter.



I would expect them to end the year in the high-single digits, about 8-9%,” an analyst with a Mumbai-based brokerage said.

According to another analyst: “The last time when they had this trajectory (double-digit growth) they had a TCV (total contract value) of almost $5 billion, a year back. Unless there are a few other big deals in the coming quarters, it’s not a surety.”

Aniket Pande, analyst, institutional equities at Prabhudas Lilladher said HCL Tech will lead the industry in the current fiscal year, with 11% organic growth.