TCS Q2 results preview: Profit may rise 9-11%; all eyes on share buyback, dividend

Tata Consultancy Services Ltd (TCS), India largest IT firm by revenues, is likely to report a 9-11 per cent year-on-year (YoY) jump in net profit for the September quarter on a roughly 9 per cent rise in sales. The Tata group firm, which is scheduled to declare quarterly earnings post market hours, could report expansion of margin sequentially. Deal wins are seen at $12 billion,
up 48 per cent YoY.

Ahead of its results, TCS informed stock exchanges about its board meeting on share buyback and second interim dividend. The last time TCS announced share buyback was in 2022. It totalled Rs 18,000 crore. The preceding three buybacks amounted to Rs 16,000 crore each. Investors would be eyeing updates on capital allocation policy and share buyback. Analysts for now sees Rs up to Rs 22,000 crore in buyback and a moderate dividend payout.

The Mumbai-headquartered firm is seen logging better Q2 numbers than Bengaluru-based peer Infosys. They feel investors may like to hear more on the performance of BFSI vertical, any change in priority under the new CEO Krithivasan, discretionary demand outlook and deal pipeline, and also margins.

Post results, the TCS management would be addressing the media at 5:30 pm, which will be followed by an earnings conference call at 7 pm IST.

IIFL Securities said it sees profit for TCS at Rs 11,497.80 crore, up 10.2 per cent YoY. It sees revenue at Rs 60,268.30 crore, up 9 per cent. It sees Ebit margin at 24 per cent.

"We forecast TCS' revenue to grow by 1.2 per cent CC QoQ (up 0.9 per cent QoQ), as discretionary spend by clients remained soft amid an uncertain macro. We forecast Ebit margins to expand 80bps QoQ, due to the absence of wage hikes and visa costs, partially offset by muted growth.

For the quarter, TCS announced several deal wins including that of Lantmännen, JLR, Lexmark, GE HealthCare, Athora, BankID BankAxept AS and BBC, among others.  TCS clocked $10.2 billion in deal wins in the first quarter following $10 billion of deal wins in March quarter, which was above the guided range of $7-9 billion. Nirmal Bang Institutional Equities sees the second quarter quarter's deal wins, including BSNL deal, in the guided range.

Emkay Global sees TCS reporting 9.4 per cent a rise in profit at Rs 11,415 crore on a 9 per cent YoY growth in sales at Rs 60,283.60 crore.

HDFC Institutional Equities expects a better 10.5 per cent YoY growth in profit for TCS at Rs 11,530 crore. This brokerage sees sales growing 9.5 per cent YoY rise to Rs 60,565 crore. HDFC Institutional Equities pegs dollar sales are seen at $7.33 billion, up 1.5 per cent sequentially. Ebit margin is seen improving 94 basis points QoQ (up 9 basis points YoY) to 24.1 per cent.

Motilal Oswal Securities sees TCS profit at Rs 11,610 crore, up 10.9 per cent YoY. It sees sales at Rs 60,400 crore, up 9.2 per cent. The domestic brokerage projects Ebit margin at 24 per cent.

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