India’s largest IT services company Tata Consultancy Services (TCS) on Monday financial result For the March 2022 quarter, thus beginning India Inc’s earnings season. The company does not provide revenue growth guidance, but investors will watch management comment on the outlook. Here are the important parameters for investors to look for in results:
EBIT Margin
ICICI Securities said in a report that the company’s EBIT margin is expected to decline 20 bps quarter-on-quarter to 24.8 per cent.
increase in revenue
analysts said TCS It is expected to report higher sequential growth as compared to Tier-1 IT companies like Coforge and LTI. HDFC Securities said, “USD Revenue/EPS CAGR at 12 per cent in FY22-24E supported by scale and breadth of services including industry platforms, from deal booking across Core Vertical (BFSI)/ Core Geography (North) market-share gains. Americas), improved execution and operating track record and improved balance sheet.”
Growth in key verticals
TCS has a greater reliance on banking, financial services and insurance (BFSI) and retail verticals than its peers in the industry, and its growth in these sectors will be a key watchdog. BFSI contributes the highest at 31 per cent to the company’s total revenue, while retail contributes around 14 per cent to the total revenue.
“Performance will be broad-based, boosting revenue growth with improving traction across BFSI, telecom, healthcare, manufacturing and retail sectors,” said Yes Securities.
Management Commentary on Outlook
Yes Securities said it expects broadly stable margins, with attrition almost peaking. It will be important to heed management’s comments on the outlook on the development environment.
deal pipeline
HDFC Securities said deal pipelines/bookings are under major watch for TCS. This includes major deals like Cemex, Western Power and Fletcher.
Apart from these, Yes Securities also said, “Performance in this quarter will be slightly affected due to fewer days in this quarter.” Attrition is almost at peak for most of the IT companies and it should stabilize and come down going forward. EBIT margin performance is expected to be flat (+/- 20bps) QoQ for most companies.”
ICICI Securities in its report said, “Growth of Indian IT companies is expected to moderate in Q4FY22 as seen historically in Q4. Margins are expected to be impacted due to rising employee expenses. The demand environment remained strong on sustained transaction momentum led by sectors such as BFSI, Insurance etc. There will be some cross currency headwinds during the quarter, which will offset dollar revenue somewhat in the fourth quarter.
In the December 2021 quarter, Tata Consultancy Services reported a 12 per cent jump in its net profit at Rs 9,769 crore as against Rs 8,701 crore in the corresponding period of the previous fiscal. Its revenue from operations also grew 16 per cent to Rs 48,885 crore in the third quarter of the current fiscal. A year ago it was Rs 42,015 crore.
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