Tata Consultancy Services Ltd. could be an exciting investment option despite its muted performance in the second quarter of the current financial year, according to Santulan Investment Trust's fund manager, Parag Thakkar.
Talking to NDTV Profit, Thakkar emphasised the IT service provider's robust fundamentals as the basis for his positive outlook. The stagnation phase could be temporary and the IT giant will bounce back, he suggested.
“If a very high-quality company—meaning good promoter, return on capital employed, free cash flow, debt-free balance sheet—goes through a stagnation phase of earnings and markets start forgetting about it, or giving it a lower multiple, then there is a point that the company is doing something to address this issue and will bounce back,” he said.
Thakkar noted that TCS aligns with his investment philosophy, despite recent challenges.
“The last two quarters were not that great. Margins this quarter were 24.1%, which was below estimates because the BSNL deal is low-margin and they lost some business in US healthcare services. Hopefully, they will get it back,” he said.
The fund manager said that the company has a Rs 15 lakh crore market cap, generating Rs 50,000 crore cash flow last year.
“So in FY26, they will end it with Rs 62,000 crore free cash flow. So I am getting a 3.5-4% dividend yield in a TCS stock,” he said.
“People are waiting for TCS to call out that there is a recovery. But you have to buy stocks when there is uncertainty. You have to buy great stocks in uncertainty,” Thakkar explained.
Shares of TCS traded 0.83% lower at Rs 4,101.60 apiece on the NSE at 1:45 p.m., against benchmark Nifty 50's slip of 0.33%.
The Santulan Investment Fund manager also anticipated stronger performance from banking and financial stocks, including SBI and ICICI Bank Ltd.
“India as a market is not expensive; 35% of the Nifty is not that expensive. If you deduct the subsidiary value of SBI, it is 1 times book value and 6 PE. So it is just 6 PE for a bank, which is financing 25% of the economy,” he said.
SBI, ICICI Bank, HDFC Bank Ltd., LIC Housing Finance, Federal Bank and Karnataka Bank are good pockets of value, according to Thakkar.
Among other bets, the analyst picked stocks of cement and metal companies like Ambuja Cements Ltd., UltraTech Cement Ltd., Shree Cement Ltd., NMDC Ltd. and National Aluminium Co.
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