Why TCS Share Price is Falling

IT bellwether TCS took the biggest hit last week amid an overall weak trend in equities, tumbling by Rs 556.5 bn in market cap.

The company is among India's most significant IT players and has underperformed benchmark equity indices Sensex and Nifty in the past one year.

The share price of TCS has dropped by 9% in the past month, trading near its 52-week low levels.

This isn't the first time TCS has come under intense pressure. The stock experienced a similar decline in July 2022, and we wrote explaining about it in our editorial - Why TCS share price was falling.

Let's find out why TCS is reeling under pressure again.

#1 Change in guard

In a surprising turn of events, Tata Consultancy Services (TCS) CEO and MD Rajesh Gopinathan announced his resignation as TCS CEO on 16 March 2022 after a 22-year career with the company.

Mr Gopinathan was reappointed as CEO for a five-year term until February 2027, only a year ago. It is rare for CEOs to quit when they have four years left in their tenure.

Unlike its rivals Infosys and Wipro, which were roiled by turbulent CEO appointments and exits, the Tata group company has had just four CEOs in its 55-year history. And all of them have spent decades at the firm.

The timing could not have been worse.

His exit also comes amid worsening macros in the US, the biggest technology market and the crisis of confidence that has gripped the US banking system in the aftermath of the collapse of Silicon Valley Bank (SVB) and Signature Bank.

According to media reports, TCS and Infosys have the highest exposure to regional banks in the United States and may need to set aside provisions due to their exposure to SVB.

Industry analysts also expect the SVB collapse to result in enterprise clients pushing their IT spending decisions, leading to longer sale cycles and delaying the actual budget cycle for 2023.

#2 Growth pangs

The company's growth too, was underwhelming compared to rivals such as Infosys.

In the last six years, TCS added more than US$ 10 bn in incremental revenues and saw an over US$ 70 bn increase in market capitalisation.

It has a revenue run rate of US$ 28 bn, with industry-leading margins. Nonetheless, TCS seems to have lost sheen compared with its rival Infosys.

Gopinathan steered TCS to grow its quarterly revenue from US$ 4.45 bn at the end of March 2017 to US$ 7.1 bn at the end of the December quarter, an impressive 59% growth.

But Infosys reported faster growth than TCS for the past three financial years.

TCS VS Infosys 3 Years Revenue Performance

Quarters	TCS		Infosys
	Total Revenue (Rs in tn)	CAGR Growth (%)	Total Revenue (Rs in tn)	CAGR Growth (%)
2019-2020	1.9	16.9	1.3	20.3
2020-2021	1.7	3.6	1.0	9.4
2021-2022	1.6	7.1	0.9	10.1

Source: Equitymaster

Due to this, the gap between TCS and Infosys is closing even though TCS, which ended with US$ 25.7 bn in revenue last year, is comfortably ahead of Infosys, which ended with US$ 16.3 bn in revenue.

With these issues ranging from certain aspects of Gopinathan's management style to some of the strategic decisions taken by the company and relative underperformance coming to light, the shares of TCS tumbled 5% in 5 days.

How TCS shares has performed recently

TCS shares have declined by more than 9% in a month. Over the past week, the company's shares are trading lower by 5%.

On a YTD basis, TCS share price is down 4%.

TCS touched its 52-week high of Rs 3,759.5 on 5 April 2022 while it touched a 52-week low of Rs 2,868 on 26 September 2022.

About TCS

Tata Consultancy Services (TCS) leading global IT services consulting and business solutions organization offering transformational as well as outsourcing services to global enterprises.

It has a global presence deep domain expertise in multiple industry verticals and a complete portfolio of services consisting of consulting, service integration application services and many more .

The Company uses all these and its industry leading suite of products and platforms to deliver high quality high impact solutions leveraging the latest technologies to customers across the world.

These solutions are delivered using its Secure Borderless Workspaces (SBWS) operating model which enables a highly distributed Location Independent Agile delivery.

It was the first company on the Bombay Stock Exchange (BSE) to reach US$ 100 bn market cap in 2018.

To know more about TCS, check out TCS's financial factsheet and its latest quarterly results.

Also check out the 2021-22 annual report analysis of TCS.

You can also compare TCS with its peers.

TCS vs Infosys

TCS vs WIPRO

TCS vs Tech Mahindra

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