TCS Q4 results on Friday: Recap of how IT bellwether fared in FY24; key things D-Street needs to watch out for

In the first quarter of FY24, saw a 3% sequential drop in consolidated net profit, while revenue rose a mere 0.4%, making it the slowest growth in 12 quarters for the country’s largest software exporter.

In the September quarter, revenue rose only 0.5% sequentially and profit rose 2.4%. In the December quarter, the topline rose 1.5%, while the profit dropped by 2.5%.

While the business environment remained soft in the March quarter too, the company got some respite on the cost front and there was a reversal in furloughs.

Let’s look at the major monitorables for Dalal Street in the March quarter print of TCS:

Core Earnings

TCS’ consolidated revenue is seen rising 1.4% sequentially to Rs 61,428.4 crore, and profit is expected to grow by 2.7% to Rs 12,050 crore, according to the average of estimates given by 10 brokerage firms.

On a year-on-year (YoY) basis, the software major’s topline and bottomline may rise 3.8% and 5.8%, respectively.

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Profitability

Most analysts see a sequential improvement in the profitability for TCS on the back of operational efficiencies.

Analysts’ estimates of operating margin for the March quarter, calculated as earnings before interest and taxes (EBIT), are in the range of 25.2-27.2%, compared to 25% in the December quarter.

“We expect EBIT margin to expand by a minimal 30 bps due to absence of furloughs and pyramid optimisation,” ICICI Securities said in its report.

Deal Wins

In the December quarter, TCS booked deals worth $8.1 billion, after seeing strong $10 billion worth of deal wins in the preceding three quarters.

However, this remained within the company’s guided range of $7-9 billion, and Nirmal Bang Institutional Equities expects deal wins in the March quarter as well to be within this range.

“We expect deal wins to be in the range of $7-9 billion in the quarter,” said Axis Securities in its report.

Cues from management

With interest rates seen trending lower in the US and growth still muted, Dalal Street investors would watch out for management’s outlook for FY25.

The business outlook for verticals like BFSI, Hi-Tech, and telecommunications will be eyed, especially after a bleak outlook from peer Accenture Plc last month.

“Commentary around BFSI, Retail, Telecom and Technology will be keenly watched as TCS has the highest exposure in the Tier-1 set with deep relationships in both the US as well as Europe, and it has been indicating weakness in these verticals. But was calling out for green shoots in BFSI during the Q3 analysts’ interaction,” Nirmal Bang Institutional Equities said.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)