TCS Q2 result preview: Here's what brokerages expect

Tata Consultancy Services, country's largest software services firm, is scheduled to report its September quarter earnings post market hours on Thursday. Analysts expect TCS to report positive cross currency impact of 80-130 basis points and an improvement in margin on account of lack of wage hikes and visa cost for the quarter.

Earlier in the June quarter, TCS had posted 10% quarter-on-quarter (QoQ) drop net profit at Rs 5,950 crore. On a year-on-year (YoY) basis, PAT had slipped 5.82% in Q1 in rupee terms.

We have compiled what brokerages expect from TCS' Q2 numbers:

Kotak Institutional Equities

Analysts at Kotak expects constant currency (c/c) revenue growth of 2.1% and cross-currency tailwind of 130 bps. Growth is weaker than usual and is impacted by soft BFS in North America and industry wide challenges in the retail vertical, they said, adding EBIT margin may recover 125 bps on normalisation of wage hike, cross currency tailwinds and operational efficiency.

Broadly, they believe investors will focus on BFS demand outlook, TCS' positioning in the evolving digital landscape, growth outlook for digital practice and progress on large digital integration deals and margin outlook.

Edelweiss Securities

The broking firm expects TCS to report 0.7% sequential revenue growth in CC terms, and 1.6% growth in US dollar terms. EBITDA margins are expected to expand by 140 basis points (bps) QoQ on account of absence of wage hikes and visa costs, it said, while commentary on client budgets, spends by BFSI and retail clients are key monitorables.

Reliance Securities

Reliance Securities pegs TCS' dollar revenue growth at 3.8% QoQ, while CC revenue is pegged at 2.5% QoQ. The brokerage believes favourable cross currency movements and operational efficiency will aid margin expansion.

IT budget trend and client commentary, BFSI, retail vertical trends and acquisitions are key factors to watch out for.

Motilal Oswal Securities

There is a case for margin expansion for TCS since their wage hikes are now behind, and the absence of visa expenses will provide for some tailwinds, the brokerage said. MOSL expects TCS to report 80 bps sequential jump in EBITDA margin, while net profit after tax (PAT) may rise by 7% to come in at around Rs 6,600 crore.