India’s biggest software companies Tata Consultancy Services (TCS) and Infosys which together make up 11 percent of the Nifty 50 index failed analysts on the March quarter front. TCS missed expectations, while Infosys delivered a shocker.
Both companies missed analyst estimates in the quarterly profit as they cut-down spending on technology to prepare for a cooling economy following turmoil in the US Banking Sector. However, Infosys not only missed expectations, but also said that it expects constant currency revenue growth of 4-7 percent, which is lower than the 6-8 percent estimate.
In the past year, the share price of TCS has fallen by 9.83%, while that of Infosys has fallen by 19.40%, against a 4.14% rise in the benchmark Nifty 50 and a 0.59% increase in the Nifty IT index.
Revenue
TCS: On a consolidated basis, TCS posted revenue from operations of ₹ 59,162 crores for the January to March quarter (Q4FY23) of financial year 2022-23, against 50,591 crores in the corresponding quarter of the previous year (Q4FY22), indicating an increase of 16.94%.
It reported a revenue of ₹ 2,25,458 crores for the year ended March 31, 2023, against ₹ 1,91,754 crores for the year ended March 31, 2022, indicating a rise of 17.58%.
Infosys: The company reported revenue from operations of ₹ 37,441 crores for the January to March quarter of financial year 2022-23, against crores in the corresponding quarter of the previous year, indicating an increase of 16.0%.
It reported a revenue of ₹ 146,767 crores for the year ended March 31, 2023, against ₹ 12,1,641 crores for the year ended March 31, 2022, indicating a growth of 20.66%.
Profit
TCS: The Tata Group company reported a profit of ₹ 11,436 crores in Q4FY23 against ₹ 9,959 crores reported in Q4FY22, indicating an increase of 14.83%.
It reported a profit of ₹ 42,303 crores for the year ended March 31, 2023, against ₹ 38,449 crores for the year ended March 31, 2022, indicating an increase of 10.02%.
Infosys: Infosys reported a profit of ₹ 6,134 crores in Q4FY23 against ₹ 5,695 crores reported in Q4FY22, indicating an increase of 7.71%.
It reported a profit of ₹ 24,108 crores for the year ended March 31, 2023, against ₹ 22,146 crores for the year ended March 31, 2022, indicating an increase of 8.86%.
Dividend
TCS’s board has approved a final dividend of ₹ 24 per equity share. Its shares closed at ₹ 3130.60 apiece on Tuesday. On the other hand, Infosys announced a dividend of ₹ 17.50 per share and its shares closed at ₹ 1,259.00 apiece on Tuesday.
Target
TCS: ICICI Direct has a buy call on the shares of TCS with a target price of ₹ 3,720.00, which translates to an upside of 18.83% as compared to its share price of ₹ 3130.6. The brokerage is positive on the stock because of strong organic growth, consistent financials, industry leading margins and a healthy capital allocation policy.
Infosys: Motilal Oswal Financial Services has a buy call on the shares of Infosys with a target price of ₹ 1520.00 which translates to an upside of 20.73% as compared to its current share price of ₹ 1,259.00. The brokerage said that the company posted a weak set of earnings in the latest quarter on account of a weak macroeconomic environment. Despite near term weakness, the brokerage expects the IT major to be a key beneficiary of acceleration in IT spends in the medium term.
Written by Simran Bafna
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