TCS share is lowering by 2.3% which is not surprising as investor’s concern was given on margins front. There is a rise in costs and no buffer is provided by rupee as a result of which margins tend to fall for all IT companies. It was expected that the performance of TCS will be better among IT companies on top. The revenue increase was expected to be 3%. It is believed that for surviving in the global economy, the focus of the company management will be on maintaining double-digit growth in revenue and a healthy business environment. The management of the TCS is very optimistic about the growth and they believe that they can achieve double-digit growth.
The analysts believe that the profitability of TCS margins will drop by 60-70 basis points. These analysts at Kotak believed that this will happen with most of the IT companies. The reason for such a decline in profitability is localization and cost structure. When utilization levels are reached already at optimum levels, it is the time when companies face talent crunch. By increasing, onsite hiring nothing could be improved. The impact of wages hike was reduced to some extent due to depreciation in rupee. But nothing provides benefit to the companies. It was finally added that EBIT of companies will decline and reasons will be a hike in wages, higher visa costs, appreciation in rupee and factors specific to companies.