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Tata Consultancy Services (TCS), the largest software services exporter in India, is set to report its earnings for the fourth quarter of FY24 today, 12 April. IT bellwether Tata Consultancy Services will kickstart the fourth quarter earnings season for the sector on Friday, and the company is likely to see an improvement in the performance sequentially due to the reversal of furloughs.
Some recovery in the mainstay banking, financial services and insurance (BFSI) vertical and continued traction in the manufacturing sector are likely to help TCS report 1.0-1.1 per cent sequential growth in revenue in constant currency terms for the quarter ended March, according to analysts.
The IT major TCS Q4 results are expected to be modest, led by the ramp-up of large deal wins, including the BSNL deal, even as weakness in key international markets persisted.
The Q4 revenue in rupee terms for TCS is expected to rise 1.5 per cent quarter-on-quarter to Rs 61,414 crore, according to an average of 10 brokerage estimates. Its fourth-quarter net profit may rise 5.8 per cent quarter-on-quarter, shows the poll. The company’s EBIT margin for the quarter is seen improving to 25.3 per cent during the January-March period.
TCS stock has risen 4.5 per cent so far this year (since January), matching Nifty 50 returns over the same period. But it has far outpaced the Nifty IT index, which fell 0.6 per cent year-to-date.
TCS to lead revenue growth; deals to help
The Tata group company’s Q4 revenue growth would be aided by sustained winning of deal, ramp-up of large deals, including BSNL, and recovery in manufacturing and BFSI verticals.
Nuvama expects TCS revenue growth for the quarter to be “driven by a recovery in BFSI and continued strength in manufacturing”, its analysts said in a recent note.
On the other hand, recent deal wins, and ramp-up of the large BSNL deal would also contribute to revenue growth, said Dolat Capital and Phillip Capital in their respective pre-earnings research notes.
Earlier, in May 2023, a consortium led by TCS had won a mega deal worth Rs 15,000 crore from state-run telecom firm BSNL to deploy 4G network across the country. Reports said at the time that TCS was expected to pocket about 80 percent of the total order value.
“We expect +1.6 percent QoQ CC (constant currency) revenue growth (for TCS in Q4) helped by full quarter ramp up of BSNL deal, reversal of furloughs and ramp up of other large deals,” said Phillip Capital.
Brokerages are upbeat on TCS continuing to win new deals. “We expect deal wins to be in the range of $7-9 billion in the quarter (January-March),” said Axis Securities.
Nuvama too said the brokerage expects TCS’ strong deal-wins streak to continue. HDFC Institutional Equities predicts strong deal bookings at above $10 billion, with several large deals in Europe.
It’s the management commentary FY25 demand environment, especially discretionary spending, that brokerages are watchful for hints of future growth prospects.
Vertical commentary features are among the most common watchables from TCS results. “The management commentary on new deal ramp-up, visibility going ahead, and vertical outlook on BFSI, hi-tech, and manufacturing are key things to watch out for,” said Axis Securities.
Will TCS declare a dividend today?
The TCS regulatory filing dated March 29, read, “We hereby inform you that a meeting of the Board of Directors of Tata Consultancy Services Limited is scheduled to be held on Friday, April 12, 2024, inter alia to: i. approve and take on record the audited standalone financial results of the Company under Indian Accounting Standards (Ind AS) for the year ending March 31, 2024; ii. approve and take on record the audited consolidated financial results of the Company and its subsidiaries under Ind AS for the year ending March 31, 2024; and; iii. recommend a final dividend, if any, on the equity shares of the Company for the financial year ending March 31, 2024, for the approval of the shareholders at the ensuing 29th Annual General Meeting.”
TCS has declared 83 dividends since October 28, 2004, as per research portal Trendlyne. TCS has declared an equity dividend amounting to Rs 69 per share in the past 12 months. At the current levels, the dividend yield of TCS stands at 1.73 per cent.
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