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TCS (TCS IN, INR 1,167, Buy)
Our recent meeting with TCS reinforces our positive view on the demand scenario and the company’s ability in sustaining its growth momentum. We present below our key takeaways from the meeting -
Upfront discretionary commitments seen in CY11 budgets
Unlike CY10, TCS has witnessed significant discretionary spent commitment at the earlier stage of discussion with its key accounts during customer meets in different geographies. IT spend during CY10 was on cautionary note while in CY11 demand is clearly looking up. TCS is quite confident of its growth going into FY12 as its book to bill ratio continues to improve and believes that high growth in FY11 is not a one-off or driven by pent up demand, which will soften in FY12. Conventional cost take out remains the key growth drivers for services like IS, BPO, ADM; for ES, consulting and PI, revenue enhancement is the driver.