Impact of Pandemic on TCS and Accenture! - Report

After COVID-19 disrupted and hit the financial crisis all across the world, most of the IT companies feared that the pandemic would have a huge impact on their performance. 

But after looking at the recent shares of IT major Tata Consultancy Services Ltd (TCS), the results showed that the pandemic will hardly have any impact on its performance. 

As per a LiveMint report, TCS shares traded at about Rs. 2,200 apiece before the markets started correcting in February and are at the same levels now. Also, the recent quarterly results of Accenture Plc. reflects a limited impact of covid-19, with its revenue being largely stable.

According to analysts at Kotak Institutional Equities, even when Indian IT firms began reporting Q1 results, which began with TCS this week. TCS’s revenue is expected to decline by 5 percent, both on a sequential and a year-on-year basis. 

Meanwhile, things may not be as bad as feared, but investors will do well to ground their expectations a bit. Initially, in April, TCS stated that the impact of the pandemic on its Q1 revenue will be similar to the peak impact but TCS had reported mid-single-digit sequential decline in dollar revenue for two consecutive quarters. 

Looking over Accenture, it is better-than-expected results that cannot exactly be extrapolated for all companies. The company made greater presence in digital services and higher exposure to healthcare and public services have helped it win orders and grow revenue. 

Julie Sweet, chief executive officer of Accenture, said: “IT budgets are declining... but clients are focusing on the digital transformation that’s needed to navigate." She also stated that the firm is starting to see the overall business environment improve which is a positive takeaway for Indian firms.

Meanwhile, Nitin Padmanabhan, analyst at Investec Capital Services (India) Pvt. Ltd asserted that “at the beginning of the June quarter, there was general fear and uncertainty. In that backdrop, the quarter has turned out relatively better. Unlike in the global financial crisis, we have not seen any massive pricing cuts across the board so far, which is a big surprise."

“While there has been very limited impact on pricing in Q1, much depends on how global businesses see recovery in business after the opening up post-lockdowns, and decisions on pricing may well be taken closer to the fall (autumn) season," said Manik Taneja, an analyst at Emkay Global Financial Services.