Tata Consultancy Services shares plunged by over 4% on Friday, a day after the company reported a 27% drop in its quarterly profit hit by a one-time employee bonus.
Dalal Street was particularly disappointed over the company’s revenues, which failed to meet even the toned-down expectations.
The stock hit a low of Rs 2,471 in the session, and eventually closed at Rs 2,476.20, down 4.2% on the Bombay Stock Exchange.
The software services exporter’s net profit in the January-March quarter came in at Rs 3,858.2 crore, down 27% from a year ago, impacted by the Rs 2,628-crore bonus it announced for staff, to mark the tenth anniversary of its 2004 initial public offering.
But its lower-than-expected 12% revenue growth in the fourth quarter at Rs 24,220 crore, as cross-currency volatility hit the company worse than expected, was more worrying.
Sluggish growth in its telecoms and energy wings, and at UK-based Diligenta which is a part of its insurance business, is also a worry, pointed out analysts.
"We believe TCS has made all the right strategic bets, but will still see decline in growth rates (and reduction in growth premium over competition) as market share gains become more challenging, and a portion of its portfolio drags overall growth," said analysts at Kotak Institutional Equities.
TCS, however, was confident of beating Nasscom’s 12-14% revenue growth forecast for the industry in the year ahead, but not all analysts were enthused.
"TCS’ outlook of confidence in beating industry growth was far less emphatic compared to its outlook for 2014-15, last year. With 15% of revenues under pressure, there are limited chances of significant surprises," said brokerage house Motilal Oswal.
Unless the weaker segments turnaround in the next 2-3 quarters, the company’s better performance compared to industry peers would "cool off" in 2015-16, say analysts.
TCS’ mid-tier rival Mindtree also took a knock; its shares tumbled almost 7% to Rs 1,295.55 after it reported a 9% quarter-on-quarter drop in net profit. The disappointing results of the two firms also dragged down most other IT stocks on Friday. The BSE Teck index ended down 2%, while the broader Sensex was down 0.8%.