NEW DELHI: IT major Tata Consultancy Services (TCS) is expected to report a 2.5-3.2 per cent quarter-on-quarter (QoQ) rise in revenue growth in constant currency (CC) terms. Profit is expected to drop 4-6 per cent sequentially while margins are seen falling 90-150 basis points, led by wage hikes and rupee appreciation.
The management commentary on banking and finance (BFS) space, sub-contractor expenses and any visibility on double-digit growth in FY20 would be keenly tracked.
Motilal Oswal Securities expects TCS to report Rs 7,670 crore profit, down 5.6 per cent QoQ.
“We expect TCS to deliver CC revenue growth rate of 2.5 per cent QoQ (10.8 per cent YoY). Most verticals for TCS are doing well; there may be a few pockets of weakness in BFS, which will be partially offset by growth in insurance,” the brokerage said.
Data compiled by Nomura India suggests that BFS accounts for 40 per cent of TCS revenues against 35 per cent for Cognizant, 32 per cent each for Wipro and Infosys and 21 per cent for HCL Tech. The brokerage expects the vertical to impact overall growth for the whole of the sector in FY20.
“Dollar revenue growth may rise 2.1 per cent QoQ. Our EBIT margin estimate at 24.2 per cent is 150 bps lower QoQ. This is excluding the 60 bps adjustment for an one-time expense of electoral fund transfer in last quarter. TCS will incur higher expenses due to wage hike (200 bps), which is expected to be partially offset by operational efficiency gains,” Motilal Oswal Securities said.
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