BENGALURU: India’s largest IT services company Tata Consultancy Services Ltd (TCS) will be the first among peers to announce its fourth quarter earnings on Monday. Analysts expect IT companies to continue to deliver strong growth numbers on the back of digital and cloud transformation initiatives with enterprise clients. According to Motilal Oswal, Tier I companies should deliver revenue growth in a narrow range of 2.8-5.1% sequentially in constant currency. While TCS does not provide formal revenue growth guidance, management’s comments on the outlook for the business will be monitored closely.
According to Bloomberg’s consensus estimates, TCS is expected to post revenue of 50,249 crore and net profit 10,077 crore for the March quarter.
Mint highlights five things to look for in TCS’s Q4 results which will be announced after market hours on Monday.
increase in revenue
According to ICICI Securities, TCS is expected to post 3% sequential growth in constant currency due to continued improvement in demand in banking, financial services and insurance (BFSI), healthcare, retail, accelerating digital technologies and ramp-up of deals. Is. , In addition, the brokerage said the cross-currency headwind would lead to revenue growth of 2.7% sequentially in dollar terms. In rupee terms, revenue is expected to grow by 3.1% sequentially.
EBIT Margin
Analysts expect margins to come under pressure and remain flat or decline in the fourth quarter on account of unfavorable supply-side conditions. For TCS, EBIT margin is expected to decline 20 basis points quarter-on-quarter to 24.8%, according to ICICI Securities. Brokerage firm Sharekhan believes that EBIT margins are likely to remain flat sequentially. “We believe margin headwinds such as higher hiring expenses, increased discretionary expenses, and higher-than-usual Visa spend will be offset by improvements in operating efficiencies and pyramid balance to offset the growing workforce. also believe that TCS has strong supply-side capabilities among its peers.”
transaction speed
Investors will be closely monitoring the pipeline of the deal and the momentum for TCS. The growth of the IT major is expected to be driven by higher discretionary spending and digital transformation initiatives. “We expect deal TCV (total contract value) to remain stable on a sequential basis of approximately $8 billion in Q4, led by mid-sized deals. However, lack of any major deals will result in a year-on-year decline,” Sharekhan said in an earnings preview.
corporate restructuring
Investors will be keenly interested in the corporate restructuring of TCS planned for FY23. TCS is expected to unveil a new operating structure with four separate business groups being created to propel the next phase of growth to touch the next milestone of $50 billion in revenue. This is not the first time that TCS is restructuring its business structure. In 2008, the company created 23 smaller units worth approximately $250 million, a structure that helped fuel substantial growth for the company.
Management Commentary on Outlook
According to Sharekhan, investors will keep an eye on the management’s comments on the overall demand environment; The impact of recent geopolitical tensions on customers’ technology spending; Due to non-signing of big deal; and comment on the progress of your product and platform portfolio. Apart from this, investors will also keep a watch on the attrition rate and demand from all verticals especially BFSI, Manufacturing, Communication and Retail.
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