IT sector behemoth Tata Consultancy Services will announce its Q4 earnings today barely a week after country's second-largest software firm Infosys lowered margin guidance for FY19 during the first earnings presentation of the March quarter which spooked investors.
Revenue growth for the country's largest software exported is seen in Q4 at 2.2% Q-o-Q from 1.3% in the previous quarter, led by rampup of recently-won deals, brokerage Motilal Oswal said in a report. In Q3 of the last fiscal, the firm reported 1% percent rise in revenue to Rs 478.7 crore on QoQ basis. The revenue rose 9.1% from the year ago period.
Third-quarter revenue in rupee terms rose 1.2% to Rs 30,904 crore from the preceding three months in Q3. It is expected to come at Rs 31,837 cror a rise of 7.4% year-on-year.
With cross-currency tailwinds of 110 bps, Motilal Oswal expects dollar revenue growth of 3.3% QoQ.
The firm is seen logging earnings before interest and tax (EBIT) margin estimate at 25.5% (+30 bps QoQ), led by currency benefits.
However, margins are likely to take a hit after Q1 of the current fiscal, as lower margin deals start to hit profitability, in addition to the usual headwinds of visa expenses and wage hikes.
Motilal Oswal estimates TCS to log profit after tax of Rs 6,860 crore (+5% QoQ), led by sequential growth in operating parameters and higher other income. In Q3, the firm logged Rs 6,531 crore in profit after tax, a rise of 1.3% QoQ and fall of 3.6% on an year-on-year basis.
Outlook on banking and financial services and retail, traction in new digital initiatives (automation/solutions) and margin expectations for the next year are likely to be the focus of the earnings to be announced today evening.
Meanwhile, the stock closed 0.99% or 31 points higher at 3,190 level on BSE.
HDFC Securities expects the IT firm to log 2.9% revenue growth in Q4 on a quarter on QoQ basis at Rs 31,665 crore.
Profit after tax for Q4 is expected to come at Rs 6,829 crore.
In a note, the brokerage said TCS' digital penetration is within 55% of its overall clients and digital revenue has grown at 40% compounded annual growth rate over the past two years to 22.1% of revenue in 3QFY18.
TCS signed its largest digital deal of TCV $50 mn in 3Q and is increasing its strategic positioning within its accounts, especially in areas of Internet of things and big data & analytics ($ 2 bn annual rate of analytics). TCS has signed 22 large deals in the last two quarters, HDFC Securities said.
Kotak Securities sees constant-currency revenue growth of 1.3 per cent and cross-currency tailwind of 130 bps.
The firm will see an uptick in growth due to a ramp-up of some of the deals won in second half of FY18.
Earnings before interest and tax margin are seen recovering by 25 basis points on operational efficiency and rupee fall compared with non-dollar currencies.
Net profit growth seen flat on completion of buyback that has impacted other income, Kotak Securities said in a note.