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IT-giant Tata Consultancy Service (TCS) is set to announce its financial performance for the quarter ending June 2022 (Q1FY23) tomorrow. Ahead of quarterly earnings, TCS shares witnessed buying sentiment on Thursday. In the first quarter of the current fiscal, TCS is expected to garner double-growth in the top-line front on a year-on-year basis due to strong deal execution. Also, rupee depreciation is seen to boost revenue. TCS may post constant currency revenue growth in the range of 2.5-4.5% sequentially. However, a salary wage hike is likely to impact margins.
On BSE, TCS shares closed at ₹3,286.95 apiece up by ₹26.65 or 0.82%. TCS is the second most valued company on BSE with a market valuation of ₹12,02,711.89 crore.
In IT sector Q1FY23 preview report, Sameer Pardikar, Research Analyst at ICICI Direct for TCS said that revenue growth momentum should pick up on account of acceleration in deal execution but margins are expected to be impacted by annual salary wage revision effective from April 2022.
"TCS is expected to register 3% QoQ growth in constant currency led by continued improvement in demand from BFSI, healthcare and retail, acceleration in digital technologies, ramp-up of deals," the analyst said.
Further, the analyst added that the company's cross-currency headwinds of 140 bps would lead to revenue growth of 1.6% QoQ in dollar terms.
In rupee terms, the analyst said, revenue is expected to increase by 3.8% QoQ aided by rupee depreciation. Meanwhile, EBIT EBIT margins are expected to decline 110 bps QoQ to 23.9% due to i) wage revision in both onsite & offshore ii) increase in retention costs iii) some increase in travel costs while "we expect some tailwind in margins on rupee depreciation."
PAT is expected to decline 0.8% QoQ, the analyst added.
Key things to watch in the earnings are - demand outlook in key verticals of BFSI and Retail CPG along with the margin outlook for FY23.
ICICI Direct analyst expects TCS revenue at ₹52,533.8 crore in Q1FY23 up by 15.7 yoy and 3.8 qoq. PAT is estimated at ₹9,842.4 crore up by 9.3% yoy but down by 0.8% qoq. EBITDA is forecasted at ₹13,816.4 crore up 9.1% yoy however lower by 0.2% qoq.
On Friday, the company's board will also consider the declaration of an interim dividend to the equity shareholders. The company has fixed July 16 as the record date for the payment of the interim dividend.
As of March 31, 2022, TCS net income stood at ₹38,327 crore rising by 14.8% from the previous fiscal. FY22 revenue climbed by 16.8% yoy to ₹1,91,754 crore. By FY22 end, TCS employee headcount stood at 592,195.