What should investors expect from TCS going ahead? Apurva Prasad answers

"I mean, see our preference within the large caps and if I am including LTI Mindtree within that, that is the one that we would prefer from an absolute upside potential near term," says Apurva Prasad, HDFC Securities.

What's next from TCS and what is it that you have made of the commentary? Are you getting any hint that they are out of the rough seas?
I mean, I think it is a bit of a mixed thing because there is some kind of a contrast there. So while the second quarter revenue performance seems to be subdued, but it is getting more than offset by or at least offset by the bookings number that came through and the operational performance also, despite a flattish trajectory. So I think there is sort of contrasting factors, some elements that worked, some that did not, sort of nets off to not significant change in terms of how we were assessing TCS.


If one were to in the pecking order of your preference, the top three names, TCS, Infosys, HCL Tech, even LTI Mindtree, how would your preferences look like in terms of valuations?
I mean, see our preference within the large caps and if I am including LTI Mindtree within that, that is the one that we would prefer from an absolute upside potential near term. But after that, we do like an HCL Tech, TCS, Infosys in that order, and we were not as upbeat on Wipro and Tech M so that is roughly our pecking order.



The fact that there is that anticipation that there could be a subdued demand environment, the US recessionary fears etc. Is there a sense that we could see things improving or is that potentially or concerns of the recessionary fears etc. likely to weigh down on IT companies as a whole going down into the second half of the year?
No, but we do expect improvement. Now, whether it happens say second half Q3 or it starts Q4 or it gets a bit more protracted, I think that is probably more a near term debate.

But the bookings number, that itself gives a lot of confidence of a much stronger exit. I think that is a key aspect. And apart from that, some of the operational elements have also become very favourable for the sector.

So effectively, what is happening is your cost of replacement is coming down, is lower than the existing cost base, which is a good sign. So you look at a scenario where the sector growth rates have decelerated from 12%, 13% to this year, 4%, 5%. Margins are holding up. So I think that aspect could probably improve further with some operating leverage as that comes in the next couple of quarters. But yes, I think deal bookings would probably be the key highlight. And we do expect even TCS and HCL Tech to report very strong deal numbers.