Mumbai Capital

All well with banking vertical, says TCS, after Cognizant warning

Tata Consultancy Services Ltd and Infosys Ltd were among the worst performers on the benchmark, Sensex, losing 3.68 per cent and 3.46 per cent respectively. —file photo: Reuters  

Tata Consultancy Services, India’s biggest software exporter, on Tuesday said its banking and financial services industry vertical continues to grow well, ahead of the overall company’s growth.

The announcement comes day after its US-based rival Cognizant forecast its 2016 revenue to rise 10-14 per cent, compared with consensus estimates of 14 per cent, driven by unpredictable spending in healthcare and financial-services verticals.

Cognizant’s warning sent Indian information technology stocks tumbling on Tuesday, with the S&P BSE Information Technology Index falling 3.40 per cent, making it the worst performer among the sectoral gauges compiled by BSE Ltd.

Tata Consultancy Services Ltd and Infosys Ltd were among the worst performers on the benchmark, Sensex, losing 3.68 per cent and 3.46 per cent respectively. Wipro fell 1.72 per cent, while HCL Technologies Ltd retreated 4.52 per cent.

“We believe this (Cognizant) guidance along the lines of 13 per cent organic growth it achieved in CY15 is a clear harbinger of signs of deceleration in the IT services industry,” Vibhor Singhal, analyst at Phillip Capital, said in a note to clients.

The brokerage also said it maintains a negative stand on the Indian IT services sector and expects revenue growth to decelerate for most companies (excluding Infosys, Mindtree and NIIT Tech). The firm maintained a buy rating on Infosys, neutral on TCS and HCL Tech, and sell on Tech Mahindra and Wipro. In the mid-cap space, it maintained buy on Mindtree and NIIT Technologies.

“Banking is the largest vertical for Indian IT. Pushback in spending will have negative implications for Indian IT,” Kawaljeet Saluja and Jaykumar Doshi, analysts at Kotak Institutional Equities, said.

“We also believe a few specific situations of captive ramp-up, change in leadership at a few large global banks, and associated change in strategies could weigh on growth and spoil the party for a few in the banking vertical. We expect 1-2 per cent lower growth for the industry due to a weak setup for CY16. We retain that view with some possibility of minor downside bias. Infosys remains our top pick in the sector,” they said.

In an announcement after the market close on Tuesday, TCS said it is reiterating that its banking and financial services vertical is doing well, allaying market concerns about the state of demand in the vertical.

TCS pointed out that revenues from the banking and financial services vertical grew 15 per cent year on year in calendar year 2015 in constant currency terms, while the overall revenue grew 13.5 per cent for the same period.

“Our growth in the BFS vertical is driven by our strong participation in our customers’ digital spending,” N Chandrasekaran, CEO and MD of TCS, said in a statement.




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Printable version | Jan 18, 2022 8:19:48 PM | https://www.thehindu.com/news/cities/mumbai/business/all-well-with-banking-vertical-says-tcs-after-cognizant-warning/article8216891.ece

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