Bengaluru: The largest IT service company in India Consultancy Services Ltd. (TCS) will be the first between peers to announce its fourth quarter income on Monday. Analysts believe the IT company will continue to post strong growth numbers on the Digital Transformation Initiative Account and Cloud with company clients. The Tier I company must provide income growth in a narrow range of 2.8-5.1% in sequence in a constant currency, according to Motilal Oswal. While TCS does not provide formal income growth guidance, management comments about business prospects will be closely monitored.
As per the estimated consensus by Bloomberg, TCS is expected to post revenue ₹ 50,249 Crore and ₹ 10,077 crore for the March quarter.
Mint highlights five things to pay attention in the results of the Q4 TCS which will be stated at working hours after hours on Monday.
Income growth
TCS is expected to register 3% sequential growth in a constant currency led by increasing demand requests from banks, financial services and insurance (BFSI), health care, retail, acceleration in digital technology, and ramp-up agreements, according to ICICI Securities. Furthermore, the brokerage company said that cross-currency headwinds would lead to revenue growth of 2.7% in sequence in terms of dollars. In the term Rupee, revenue is expected to increase 3.1% in sequence.
Ebitarious Margin
Analyst hopes the margin is under pressure and remains flat or decreases in Q4 because the supply side headwinds. For TCS, the EBIT margin is expected to decrease 20 basis points a quarter in the quarter to 24.8% due to increasing employee cost increases amid high friction, according to ICICI Securities. Sharekhan broker companies believe the EBIT margin is likely to remain flat in sequence. “We believe the headwinds margin such as higher recruitment costs for binding friction increases, increasing discretionary costs, and higher visa costs than will usually be balanced with operating efficiency and increase in balancing pyramids. We also believe TC has a strong supply side ability in between his friends. “
Handle momentum
Investors will closely monitor pipes and momentum deals for TCS. Major IT growth is expected to be driven by higher digital expenditure and transformation initiatives. “We hope to handle TCVs (total contract values) to remain stable with a sequential basis of around $ 8 billion in Q4, led by middle size offers. However, it will decrease by Y-O-Y because of the lack of large offers,” Satekhan said in revenue preview.
Company restructuring
There will be a sharp interest in investors on the restructuring of the TCS company planned for FY23. TCS is expected to uncover a new operational structure with four different business groups made to push the next growth phase to touch the next milestone from $ 50 billion. This is not the first time TCS restructured its business framework. In 2008, the company created 23 smaller units of around $ 250 million, which helped increase substantial growth for the company.
Management comments about Outlook
According to Sharkran, investors will be careful with management comments about the overall demand environment; The impact of geopolitical tensions has recently been about client technology expenditure; Reasons for the absence of a large signing; and comments about the progress of the product and the platform portfolio. In addition, investors will also pay attention to the level of friction and demand from cross vertical, especially BFSI, manufacturing, communication, and retail.
