TCS Q3 results, dividend today: Profit may rise 7-11%; margin may expand sequentially

Tata Consultancy Services Ltd (TCS) is likely to report a 7-11 per cent jump in year-on-year (YoY) profit on a muted growth in sales in a seasonally weak quarter marked by high furloughs, with some improvement in sequential margins likely due to higher offshoring, cost optimisation and pyramid restructuring. Deal wins may cool off but the overall numbers are likely to be far better than Infosys Ltd that too is scheduled to report earnings later today. All eyes will be on announcement on interim dividend, and on the management commentary on commentary on demand and banking vertical, large deal wins, and outlook on client 2024 discretionary spend.

YES Securities expects profit for TCS to jump 7.1 per cent YoY to Rs 11,620 crore on a 3.1 per cent YoY rise in revenue at Rs 60,323 crore.  Motilal Oswal, which sees profit rising 7 per cent for the quarter, expects Ebit margin is seen coming in at 24.5 per cent. Outlook on near-term demand environment and BFSI vertical and deal wins would be key monitorables, it said.

"After three successive quarters of $10 billion or above TCV, we believe Q3FY24 TCV will cool off to a possible sub-$10 billion number," Nirmal Bang said while expecting profit for TCS to rise 7.8 per cent YoY to Rs 11,691.70 crore on 2.4 per cent YoY rise in sales at Rs 59,608 crore. 

TCS had reported a total contract value of $11.2 billion, after clocking TCV of $10.2 billion in Q1FY24, which was above the guided range of $7-9 billion. 

Nirmal Bang sees TCS reporting a flat revenue growth sequentially on constant currency basis, led by strong order inflow of the last three quarters. It said TCS likely faced higher than normal furloughs due to its large exposure to the BFSI sector and, therefore, expects cross-currency headwind of 75 basis points sequentially. 

Nomura India expects revenue for TCS to decline 0.4 per cent sequentially in constant currency terms. It expects a 0.7 per cent positive revenue contribution from BSNL project and negative impact from furloughs and weak discretionary demand. It sees EBIT margins to expand 40 bps QoQ driven by focus on cost control.

On a sequential basis, Axis Securities sees TCS clocking a sequential revenue growth of 1.5 per cent. It said a moderation of subcontract cost would result in margin expansions of 28 basis points. This brokerage estimated deal wins at $6-$8 billion. It sees profit at Rs 11,565 crore, up 10.9 per cent. Revenue for the quarter is seen rising 4 per cent YoY to Rs 60,570 crore. 

Meanwhile, the TCS board would also be considering and declaring its third interim dividend for the financial year. The dividend, if declared, will be paid to TCS shareholders, whose names appear on the Register of Members of the K Krithivasan-led IT firm or in the records of the depositories as beneficial owners of the shares as on Friday, January 19, 2024, which is the record date.

The results would be announced post market hours. TCS would address media in a Press Conference at 5:30 pm. It would later host an earnings conference call at 7:30 pm IST.