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TCS to Announce Q2 Results Today; Here's What to Expect

Image for representation. (Image source)

Image for representation. (Image source)

Most brokerages are expecting the company to post single-digit revenue growth this time as against the expectation of double-digit number earlier, weighed down by the weak performance of the banking and financial services (BFS) sector.

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IT major Tata Consultancy Services Ltd (TCS) will be kick-starting the earnings season on Thursday as it announces its September quarter (Q2) results after-market trading hours. Traders would be keeping a close watch on the TCS share price ahead of the earnings as brokerages forecast a mixed set of numbers for the quarter.

Most brokerages are expecting the company to post single-digit revenue growth this time as against the expectation of double-digit number earlier, weighed down by the weak performance of the banking and financial services (BFS) sector.

Brokerage Motilal Oswal Financial Services said, “Segment-specific issues in BFS, especially in capital markets, are expected to exert pressure. Weak IT spending by a couple of European banks can further drag growth. In addition, the recovery in retail may be delayed, putting further pressure on the growth rates. All of these may lead to divergence from double-digit growth expected earlier.”

Motilal Oswal expects TCS to post sequential revenue growth of 2.3% in constant currency (CC) terms in the September quarter, implying year-on-year growth of 8.8%. Another brokerage house Kotak Securities also expects CC revenue growth of 2.6% during the quarter.

According to Prabhudas Lilladher, TCS may post CC revenue growth of 3.2% during the second quarter along with cross-currency headwinds of 72 basis points and moderation in revenue growth due to client-specific issues in BFSI vertical in Europe.

In terms of profit, Prabhudas Lilladher expects TCS to report adjusted PAT (profit after tax) of Rs 8,542.7 crore during the September quarter, up 8.1% year-on-year. Kotak sees adjusted PAT rising 6.3% y-o-y to Rs 8,396.6 crore, while Edelweiss expects it to be even lower at Rs 8,150.5 crore, up 3.2%.

Kotak Securities says TCS’s Ebitda (Earnings before interest, tax, depreciation and amortization) will jump 6.7% year-on-year to Rs 10,969.3 crore during the September quarter, while Edelweiss Securities estimates it to grow 5%. As per Prabhudas Lilladher, Ebitda may climb by an even lower 4.6% to Rs 10,746.1 crore in the September quarter.

Operating margins may also remain muted for TCS. Kotak Securities expects a 9 bps y-o-y decline in Ebitda margin at 27.8% in the September quarter, while Prabhudas Lilladher says a 71 bps YoY decline in margins is possible.

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