Broker’s Call: Tata Consultancy Services (Hold)

Tata Consultancy Services (TCS) is set to acquire MHP, Porsche's IT consulting arm, for €320 million, which equates to a 0.43x sales multiple for the year 2025. This marks TCS's third acquisition in the past year, indicating a more aggressive approach to organic growth after a period of limited M&A activity. However, TCS's stock has underperformed its large peers over the past month.

MHP's strengths lie in automotive, manufacturing, AI, SAP, and digital transformation. Nevertheless, its revenue declined by 11% year-on-year to €742 million in 2025, and its on-site-heavy business model likely results in lower margins compared to TCS. While the acquisition represents approximately 2.7% of TCS's estimated FY28E revenue, the inclusion of a €1.25 billion, five-year Porsche contract provides revenue stability and reduces execution risk.

The deal is strategically significant as it strengthens TCS's presence in Germany and the European automotive ecosystem. However, it may be marginally margin-dilutive in the short term. Porsche's five-year contract requires regulatory and antitrust approvals and is expected to close within the next three to four months.

The analysts maintain a 14x target P/E multiple for TCS, supported by improving client cohort metrics, a 5% payout yield, and an attractive 6.5% FCF yield. Consequently, they retain their Hold rating with a revised target price of ₹2,350 per share, valuing the stock at 14x September 2028's estimated EPS.