BENGALURU (Reuters) - India's Tata Consultancy Services fell nearly 3% on Tuesday after missing profit estimates and flagging challenges in Europe while the IT major's first workforce decline since the pandemic in 2020 indicated a sharp growth moderation ahead, analysts said.
Shares of India's largest IT services provider fell as much as 2.7% to 3,230.1 rupees, dragging the broader market down 0.7%. The stock had risen 3.4% ahead of the results on Monday.
TCS is the top loser on Nifty IT index, which is down 1.5%.
The results set the tone for the IT industry that is seeing demand wane after a pandemic-fuelled boom, in the face of a looming recession in the United States and Europe from where it draws a bulk of its revenue.
"Falling book-to-bill ratio along with declining headcount points to sharp growth moderation," Jefferies analysts wrote in a note. "While TCS is better placed in a recessionary environment, its rich valuations will likely weigh on stock performance."
The Tata Group flagship said its employee count reduced by 2,197 on a net basis to 613,974 as on Dec. 31, while its book-to-bill ratio -- the ratio of orders received to services billed -- slipped to 1.1 from 1.2 in the previous quarter.
The Mumbai-based company's order book fell to $7.8 billion from $8.1 billion in the September quarter.
Profit rose to 108.46 billion rupees ($1.32 billion) from 97.69 billion rupees a year earlier, but missed analysts' estimates of 110.46 billion rupees.
TCS Chief Executive Rajesh Gopinathan said the company was "constructive" on the U.S., cautious on Europe and positive on the U.K, acknowledging that the situation could be volatile.
Analysts at Jefferies rate TCS at "hold," with a price target of 3,500 rupees. The stock fell 12.9% in 2022, after five straight years of gains.
(Reporting by Anuran Sadhu in Bengaluru; Editing by Nivedita Bhattacharjee and Dhanya Ann Thoppil)