---
endpoint: analytics
pattern: Technology
status: done
latency_ms: 193834
conversation_id: be0dadfb-ea28-4dec-be33-89c5547df0d8
citations: 0
created: 2026-05-31 18:26:19Z
---

# Is CLSA incrementally more positive/negative on Tata Consultancy. If so, why?

## CLSA on Tata Consultancy Services (TCS IB) — Incremental Stance

**Verdict: NOT incrementally more positive. CLSA's stance on TCS is best characterized as "stable / steady-state constructive but unenthusiastic" — the rating and TP have been reiterated unchanged through the latest cycle, and TCS is conspicuously absent from CLSA's top-pick list within the Indian IT large-cap universe.**

### Current Rating Snapshot (latest available — corpus runs through 24-Jun-2025)

| Field | Value | As of |
|---|---|---|
| Rating | **O-PF (Outperform)** — reiterated | 18-Jun & 20-Jun-2025 [5][6] |
| Target Price | **Rs4,275** (unchanged) | 9-May / 18-Jun / 20-Jun-2025 [3][5][6] |
| Upside | **+24%** (CMP Rs3,452 vs TP Rs4,275) | 18-Jun-2025 [5] |
| Analyst | Sumeet Jain (sumeet.jain@clsa.com — CLSA India parent, not CLST) | — |
| FY26-27E CLSA EPS | Rs146.5 / Rs161.3 (2–3% above consensus) | 18-Jun / 24-Jun [12] |

### What the directional read tells you

**1. Rating and TP are static — no upgrade, no downgrade.** In the dedicated 9-May TCS note ("Gen AI helping legacy modernisation"), CLSA explicitly stated: *"We reiterate our O-PF rating with unchanged estimates/TP."* [1] The same Rs4,275 TP has held through the May 4QFY25 results review [11], the 18-Jun 1QFY26 preview [5] and the 20-Jun Accenture read-across [6]. So on a pure rating/TP delta basis, **CLSA is neither more positive nor more negative — they are sitting still on TCS.**

**2. The sector view IS getting more positive — but TCS is being left behind.** CLSA reiterated its constructive sector stance in June and explicitly named its preferred names: *"INFY, Tech Mahindra (TechM) and Persistent Systems (PSYS) remain our top picks. We have a Hold rating only for LTIMindtree (LTIM)."* [4] In the 4QFY25 review, TechM was singled out as *"our top pick among large cap IT services companies"* [10]. Within an O-PF cohort that includes TCS, INFY, HCL, Wipro and TechM, **TCS is not the relative-value call.** CLSA's covered-universe comp sheet shows TCS at the lower end of upside potential (~24-26%) versus PSYS (~27-45%) and TechM (~17-32%) — and crucially, TCS has the lowest CLSA-estimated FY25-27E revenue CAGR in the cohort at 6.4% (vs. 7.5% INFY, 7.7% TechM/HCL, 20.5% PSYS) [11].

### Why CLSA is constructive (the "O-PF" rationale)

- **Gen AI leadership / legacy modernisation moat.** TCS's MasterCraft™ platform (originally 2012, recently infused with Gen AI) is claimed to cut modernisation cost by >70%, evidenced by a 50mn-line COBOL→Java migration for a US financial services major. CLSA's view: this *"would ensure that TCS would maintain its leadership in Gen AI capabilities…and continue to maintain its industry leading profitability."* [2]
- **Strongest order book in the cohort.** TCS reported a *"second consecutive quarter of strong order book"* at $12.2bn in 4QFY25 (+19.6% QoQ, the highest in the Indian top-7) [7], with strong BFSI and retail bookings *"despite tariff related uncertainty"* and *"strong uptick"* in Gen AI demand [7].
- **Defensive quality in a stressed tape.** *"TCS having one of the highest return profiles and FCF payout ratios saw the lowest multiple correction during the tariff related uncertainty…"* [8] — its FY26 PE de-rated only ~11% YTD vs. -17% to -25% for peers, reflecting the market crediting TCS for industry-leading ROE (55% FY26CL) [11] and FCF.
- **Concrete Gen AI traction.** In 4QFY25 alone, TCS delivered *"580 AI business engagements and 150+ solutions around Agentic AI,"* and management stated *"AI deal volumes [are] more than offsetting productivity benefits being passed [on]"* [9].
- **Valuation table.** TCS trades at 23.4x FY26CL P/E, 4.6x P/B, ROE 55.2%, with 24.6% upside to TP [11].

### Why CLSA is NOT incrementally more bullish (the "not a top pick" rationale)

- **Gen AI cuts both ways for TCS.** Same 9-May note: *"these advanced productivity tools can also bring along with it deflationary risk to TCS cloud migration as well as legacy technology managed services revenues…barring certain near-term negative revenue impact."* [1] CLSA expresses confidence TCS will navigate, but the framing is "manage risk," not "capture upside."
- **Slowest growth profile in covered universe.** FY25-27E revenue CAGR of 6.4% [11] is below every other covered name except Wipro — i.e., TCS is the size/quality anchor, not the growth call. CLSA's FY26E revenue estimate is actually -2.4% below consensus for TCS — the deepest below-consensus stance among large caps [12].
- **Soft 1QFY26 setup.** Latest TCS-specific channel checks flag *"BFSI…holding up well"* but *"Autos…negative impact due to tariff,"* *"Retail…the highest impacted,"* *"CME…muted,"* TCS *"did not pursue the LTIM deal as [it] was aggressively bid"* and *"did not pursue the Phoenix deal,"* and *"Margins can be constrained in the near term."* [12] CLSA sits ~2% below consensus on FY26E TCS revenue, while above consensus on Wipro, PSYS and TechM — the relative read is that TCS is the lowest-conviction earnings call in the bucket.
- **Top picks are elsewhere.** The June notes consistently route conviction money to **INFY (closure of two acquisitions could lift FY26 guidance), TechM (self-help turnaround visible in FY25 margins), and PSYS (HC O-PF, +27% upside)** — not TCS [4][10].

### Bottom Line

CLSA is **steady-state O-PF on TCS** with an **unchanged Rs4,275 TP** — the stance has not moved positively or negatively across the May → June 2025 vintage of notes available in our archive. Within a sector where CLSA *is* turning more positive (V-shaped recovery thesis, sector reiterated as "positive stance"), **TCS is conspicuously NOT the preferred name** — it serves as the high-ROE, low-volatility anchor in the cohort but cedes the alpha call to **INFY, TechM and PSYS**. The incremental signal, therefore, is **relatively less positive on TCS than on the rest of the Indian IT large-cap cohort**, while the absolute rating remains constructive.

*Corpus note: Latest CLSA TCS-anchored coverage in this archive is 9-May-2025; latest TCS-tagged sector commentary is 24-Jun-2025. Any CLSA action after that date would not be reflected here.*

---
**Sources**
[1] Tata Consultancy — O-PF (Gen AI helping legacy modernisation) — CLSA (9-May-2025) — 607958739LinqAlpha.PDF
[2] Tata Consultancy — O-PF (Gen AI helping legacy modernisation) — CLSA (9-May-2025) — 607958739LinqAlpha.PDF
[3] Tata Consultancy — O-PF (Gen AI helping legacy modernisation) — CLSA (9-May-2025) — 607958739LinqAlpha.PDF
[4] India IT 1QFY26 (Commentary preview—status quo) — CLSA (18-Jun-2025) — 607962319LinqAlpha.PDF
[5] India IT 1QFY26 (Commentary preview—status quo) — CLSA (18-Jun-2025) — 607962319LinqAlpha.PDF
[6] India IT (Accenture 3Q25 read-across) — CLSA (20-Jun-2025) — 607962486LinqAlpha.PDF
[7] India IT (4QFY25: Expect V-shaped recovery) — CLSA (2-May-2025) — 607957919LinqAlpha.PDF
[8] India IT (4QFY25: Expect V-shaped recovery) — CLSA (2-May-2025) — 607957919LinqAlpha.PDF
[9] India IT (4QFY25: Expect V-shaped recovery) — CLSA (2-May-2025) — 607957919LinqAlpha.PDF
[10] India IT (4QFY25: Expect V-shaped recovery) — CLSA (2-May-2025) — 607957919LinqAlpha.PDF
[11] India IT (4QFY25: Expect V-shaped recovery) — CLSA (2-May-2025) — 607957919LinqAlpha.PDF
[12] India IT 1QFY26 (Commentary preview—status quo) — CLSA (18-Jun-2025) — 607962319LinqAlpha.PDF

