Mired in an intellectual property infringement case, country's largest software services exporter Tata Consultancy Services (TCS) will submit its March quarter report card later in the day after market hours.
The IT major is all set to lose its crown to rival Infosys as industry leader after the latter posted better than expected earnings in Q4 for the fourth consecutive quarter.
Brokerages expect the TCS to clock 1.9 per cent sequential revenue growth in constant currency terms and nearly 80 basis points (bps) of margin expansion in Q4 due to absence of Chennai flood impact and significant deceleration in sore points.
The stock of TCS fell 3 per cent on the BSE ahead of earnings.
"While the de-rating of the stock is broadly over, re-rating will take time. We maintain 'hold' on TCS," said Edelweiss Securities in a research note.
Below are top five things that Dalal Street will watch out for when TCS declares its Q4 earnings:
1) Revenue growth
The company has been optimistic on FY16 growth and expects a strong second half in fiscal year 2016. Brokerage Prabhudas Liladhar expects HCL Tech to report 1.5 per cent q-o-q growth in dollar terms and 2.3 per cent q-o-q in CC terms.
Broking firm Motilal Oswal Securities (MOSL) is building 11.1 per cent year-on-year CC growth in FY17, compared to 10.7 per cent y-o-y CC organic growth in FY16. However, TCS doesn't provide quarterly or yearly guidance.
MOSL expects eight of the ten large deals to rampup in the third quarter and contribute to revenue growth. Optimism in TCS is driven by fading of drags like Diligenta, LATAM and Japan.
3) Digital revenues
Execution within Digital revenues would be one of the key monitorables for TCS, said ICICI Securities. "Digital revenues constituted 13.7 per cent of overall revenues for TCS in the December quarter and have grown by 10.7 per cent and 4 per cent quarter-on-quarter in Q2 and Q3 of FY16 respectively," added the brokerage.
4) Growth in troubled segments
Investors will watch for performance in problem areas such as Telecom, E and U, Insurance and Japan. An uptick in these will be crucial for growth acceleration.
5) Management commentary on lawsuit
A federal grand jury in US ordered TCS and its Tata America International unit to pay $940 million for using data from Epic Systems without permission. Though TCS has denied the charges and said it will appeal against the verdict, investors will be keen to see what CEO N Chandrashekheran has to say on the issue.