TCS Q4 results: Deal wins, commentary on BFSI, client spends, other things to watch on Wednesday

Tata Consultancy Services (TCS) is likely to report a double digit growth in top and bottom line growth for the March quarter. The largest IT major is seen reporting a constant currency (CC) revenue growth that would be the highest among peers on a sequential basis. Ebit margin for the IT major is seen at 25 per cent. The IT major, whose shares have performed better than peers Wipro and Infosys in 2023 so far, is seen reporting $8.5-10 billion in deal wins. This would be against $7.8 billion of total contract value (TCV) in the December quarter.

Order wins

Analysts noted that IT major had announced at least eight deal wins during the quarter. They included four from BFSI, two from technology and one each from manufacturing and telecom segments. HDFC Institutional Equities sees deal wins for TCS at $8.5 billion. Kotak Institutional Equities sees strong deal wins of $10 billion-plus for TCS, assuming normal renewal component.

Client spends

Analysts noted that TCS' clients are getting more cautious in the US and Europe and that the delay in decision-making, which was more pronounced in Europe, is now visible in the US. B&K Securities said that UK, which performed for TCS in December quarter, did well in the March quarter as well. The delay in the decision-making process got hampered the small sized deals (projects) but large deals were continuing, as clients were more focused towards the digital transformation journey to achieve benefits, it said. "With all these uncertainties, growth in FY24 will moderate as compared to current year," the brokerage said.

Segment updates

In the quarter gone by, weakness was visible in BFSI (US) and Hi-tech vertical (mostly in February-end as March tends to be relatively stronger), which can impact the near-term growth, analysts said.

Amongst Tier I players , Wipro has highest share in BFSI (35.2 per cent), followed by TCS (32 per cent), Infosys (30.3 per cent), HCL Tech (20.6 per cent) and TechM (16.5 per cent). Dolat Capital Markets said TCS is among IT companies whose exposure to BFSI segment has been reduced systemically over last decade (FY13-23E), and thus it would have lesser growth impact from ongoing banking crisis

Nonetheless, "We expect muted revenue growth for TCS over the next two quarters at 0.1 per cent and 0.5 per cent QoQ in CC terms due to delay in decision-making in its two most important geographies, North America and Continental Europe, which together account for roughly 70 per cent of its overall revenues. We expect revival of demand starting September with postponed projects getting executed along with cost optimisation deals," said ICICI Securities.

CC revenue growth

In terms of revenue growth in CC terms, Nuvama Institutional Equities expects TCS to report 1.4 per cent sequential growth, which would be highest among its peers. The same brokerage expects Infosys CC revenue growth at 0.2 per cent, HCL Technologies' at 1.6 per cent, Wipro's de-growth at 0.2 per cent and Tech Mahindra's de-growth at 0.6 per cent on a sequential basis.

Profit growth

TCS is expected to clock 14-19 per cent rise in profit growth. Nirmal Bang Institutional Equities sees profit for TCS to rise 14.6 per cent YoY to Rs 11,200 crore against a 12.7 per cent growth for Infosys, 9.3 per cent growth for HCL Tech and flat growth for Wipro. HDFC Institutional Equities sees profit for the IT major at Rs 11,227 crore. Nuvama sees profit for TCS jumping 18.6 per cent YoY to Rs 11,769 crore. This brokerage sees profit for Infosys rising 17 per cent YoY, Wipro 3.5 per cent YoY, HCL Technologies (5.9 per cent YoY) and TechM (down 18 per cent).

Ebit margin

Analysts largely see TCS' Ebit margin in 25-25.1 per cent range, an expansion of at least 50 basis points sequentially. This is against 11.9-21.3 per cent Ebit margins for IT peers. Kotak Institutional Equities sees Ebit margin for Wipro IT at 16.2 per cent, Infosys at 21.3 per cent, HCL Technologies at 18.2 per cent and Tech Mahindra at 11.9 per cent. Nuvama expects Infosys to report margin at 21.4 per cent, HCL Technologies at 18.4 per cent, at Wipro 16.3 per cent and Tech Mahindra at 11.5 per cent.

Also read: JSW Steel shares in focus today on record crude steel output for Q4

Also read: Adani Enterprises, Adani Ports, Ambuja Cements: Adani group shares where MFs cut stakes in Q4 amid Hindenburg saga