Tata Consultancy Declines After Revenue Misses Estimates

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Tata Consultancy Services Ltd. fell the most in six months in Mumbai trading after India’s largest software exporter posted sales that missed analysts’ estimates.

Shares fell 4.2 percent to 2,474.85 rupees, the biggest drop since Oct. 17. The stock was the biggest contributor to the benchmark S&P BSE Sensex’s 0.8 percent slide.

Tata Consultancy reported fourth-quarter revenue of 242.2 billion rupees ($3.9 billion) on Thursday, missing the 245.4 billion-rupee median of 31 analysts’ estimates.

Revenue fell short of analysts’ projections for the third consecutive quarter amid weak demand from clients in the insurance and energy sectors. Worldwide spending on information-technology services is projected to shrink 0.7 percent this year, led by cuts at U.S. companies, researcher Gartner Inc. forecast on April 9.

“We believe TCS will underperform the Nasscom’s current revenue growth estimate of 12-14 percent” for the fiscal year, Sushil Sharma and Manav Patel, analysts at Batlivala & Karani Securities India Pvt., wrote in an April 16 note downgrading the stock rating to underperform. “Longer term TCS growth momentum is slowing down.”

Tata Consultancy posted a decline in fiscal fourth-quarter profit after the Mumbai-based company announced a one-time bonus to its employees. Net income fell to 38.6 billion rupees in the three months ended March from 53 billion rupees a year earlier.

‘Strong Headwind’

“We had a strong headwind in the energy sector because of the oil situation and huge volatility which affected the telecom sector,” Chief Executive Officer N. Chandrasekaran told reporters at a press conference on Thursday. “And we had headwinds in Diligenta, our insurance platform.”

The software exporter announced a 26.3 billion-rupee bonus for workers as a special reward to mark 10 years since listing.

Excluding a charge linked to the one-time payout, profit was 59.1 billion rupees. Net income was projected at 53.9 billion rupees, according to the median of 30 analysts’ estimates compiled by Bloomberg.

Tata Consultancy said among the orders it won last quarter were contracts from a large European bank, a telecommunications provider in the Middle East and a North American insurance company. Four of the new clients would contribute revenue of more than $100 million each, the company said.

The company “had very strong client additions across all segments,” Chandrasekaran said Thursday. “As we look into the future, our deal wins, our order book and the client sentiment all look positive and we feel confident.”

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