December quarter is historically a dull quarter for IT companies, but the last year saw an aberration, thanks to strong growth on healthy demand and lower furloughs. Against this background, the quarterly numbers of IT firms will be compared. If Accenture’s recent outsourcing business performance was to go by, order flows may stay strong for domestic IT firms.
For TCS, which is scheduled to report Q3 results on Monday, investors would be watching out for 2023 IT budget, demand trends in key verticals like BFSI, retail, manufacturing, and communications, deal intake in Q3 and pricing environment.
Also, eyes would be on margin outlook, management commentary on any impact on tech spending from higher energy prices and any delay of projects due to macro uncertainties, high inflation, and supply-chain disruptions.
Here’re five key things to watch out for:
TCS is expected to report a 1.9 per cent sequential revenue growth in CC terms compared with a likely 1.2 per cent growth for Infosys, 3 per cent growth for HCL Tech and 1.2 per cent growth for Wipro, as per Nuvama estimates. Dollar revenue is seen rising 1.6 per cent QoQ compared with 1 per cent each for Infosys and Wipro and 2.7 per cent for HCL Tech. Revenue in rupee terms is seen growing 3.8 per cent QoQ and 7.1 per cent YoY at Rs 57,434 crore.
TCS is expected to report double digit growth in YoY rise in profit for the quarter. Nuvama pegs profit at Rs 11,377 crore, up 16.5 per cent YoY or 9.1 per cent QoQ. Dolat Capital Market sees profit at Rs 11,012 crore, up 12.7 per cent YoY. Motilal Oswal Securities pegs TCS’ Q3 profit at Rs 11,220 crore, up 14.4 per cent.
ICICIdirect said the December quarter is expected to be hit by furloughs, with furloughs liekly to be higher than the last couple of years.
Motilal Oswal Securities expects TCS’ deal pipeline remains strong as it projects deal TCV to be within the $7-8 billion range. Kotak Institutional Equities, which is expecting steady but unexciting TCV numbers from IT companies as a whole, sees TCS to report TCV of $$9-10 billion. Deal momentum is expected to continue while mix of deals would be skewed towards cost-take out programs, sai ICICIdirect.
Elara Securities expects good growth in life-sciences and travel verticals. TCS is working with five large pharma majors to optimise their supply chain, it noted. The brokerage expects stronger growth from APAC and LATAM due to stronger customer additions in the geographies in September quarter.