TCS falls 0.3% as US Supreme Court rejects appeal against $140-million damages

Tata Consultancy Services stock fell 0.3 percent on November 22, extending the previous session’s fall, after the company said it would make a provision of $125 million as an exceptional item in the third quarter as the US Supreme Court rejected its challenge to a penalty in a dispute with Epic Systems.

At 9.50 am, TCS was trading at Rs 3,500, down 0.2 percent from the previous close.

India’s largest IT services company was in a trade secret dispute with US-based Epic Systems. The US Supreme Court rejected TCS’ appeal against a verdict passed by the District Court of Wisconsin, upholding $140 million punitive damages, the company said.

Epic Systems had filed a trade secret lawsuit against TCS and Tata America International Corp in 2014. The company accused the Tata Group companies of stealing its intellectual properties to develop its own, though it was contracted to implement Epic’s healthcare software.

TCS was found guilty by a jury in 2016 and asked to pay damages of $940 million initially to Epic Systems. A year later, the fine was reduced to $420 million, which included $280 million in punitive damages and $140 in compensatory damages.

The punitive damages were later held to be excessive after TCS appealed to the US Court of Appeals, 7th Circuit, Chicago, and the trial court was told to reassess it. This punitive damage was then reduced by the US District Court for Western District of Wisconsin to $140 million in July 2022.

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TCS reported a net profit of Rs 11,342 crore (about $1.4 billion) in the second quarter, surpassing street expectations. Its revenue in USD terms fell 0.2 percent sequentially to $7.2 billion in Q2 FY24.

Also Read: TCS to take $125 million hit to Q3 earnings over US lawsuit

Brokerage firm Bernstein has an “outperform” rating for TCS, but cut the target price to Rs 3,800 from Rs 3,940 in a recent report.

Brokerage firm KR Choksey is bullish on TCS and has a “buy” call on the stock with a target price of Rs 3,915.

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