Tata Tech merits a chance as broader IT sector struggles, says Dharmesh Kant

Dharmesh Kant, Head of Equity Research at Cholamandalam Securities, has voiced serious concerns about the future of mainstream IT companies, noting that the sector is struggling to offer a compelling growth story amid a lack of innovation and structural challenges.

"We are really trying hard to find positives and dig out triggers that can justify the future of IT companies," Kant told Business Today on Tuesday. "They had a glorious past, but the future is under a question mark unless they come out with some kind of disruption."

Kant doesn't see double-digit earnings growth returning for the sector in the near term. "This is one fact that the mainstream software service-providing or platform-providing IT companies are facing. Q1 FY26 earnings so far were a washout," he said.

However, Kant pointed out one exception in the pack — Tata Technologies Ltd. "Tata Tech's earnings came out with a positive bias and things should start looking up from Q2 FY26 onwards," he said.

He noted that around 80 per cent of Tata Tech's revenue comes from the automobile technology space, which has faced a slowdown in the last nine months. That slowdown may persist for another quarter due to ongoing US tariff uncertainties, but Kant expects the situation to be resolved, likely in Tata Tech's favour.

He also highlighted Tata Tech's large and sticky deal wins with global giants like BMW, Volvo and Airbus. "We remain positive on this IT firm," Kant said.

Nonetheless, he emphasised that the broader tech sector is unlikely to see strong profit growth. "The maximum PAT (profit after tax) growth we can expect is around 5–7 per cent, and that too if they maintain momentum. That's the only silver lining unless a disruptive product emerges — which seems unlikely for now."

"We've been sceptical about the tech space for the last 1.5 years," Kant concluded. "Staying away from the sector is the only advice I can give when it comes to frontline IT companies. However, if there is any significant development, one can consider it from a long-term perspective. And in that regard, I believe Tata Tech does merit a buying opportunity at current levels."

On the earnings front, Tata Technologies reported a 5 per cent rise in its Q1 FY26 consolidated net profit. During the quarter under review, profit rose to Rs 170.28 crore, up from Rs 162.03 crore posted in the year-ago period.

Shares of the company were last seen trading 1.13 per cent higher at Rs 724.85 today.