TCS Q4 results today: Here are 5 crucial things to watch out for

TCS Q4 results: TCS shares are in focus today ahead of its March quarter (Q4FY24) earnings which are expected to be modest amid persisting headwinds in key markets.

TCS share price gained about 2 per cent in Q4FY24, significantly outperforming its sectoral index Nifty IT which declined about 2 per cent during the quarter. However, the stock underperformed the benchmark Nifty 50 which rose nearly 3 per cent during the March quarter.

TCS is expected to report modest growth in revenue and PAT. As per the estimates of brokerage firm Equirus Securities, the company's dollar revenue may grow by 1.3 per cent quarter-on-quarter (QoQ) largely led the by ramp-up of large deal wins in the domestic market as growth softness is expected to continue in international markets.

Also Read: TCS Q4 Results Preview: Revenue, PAT may see modest growth; commentary on near-term demand key monitorable

EBIT margins are likely to improve by 50bps QoQ largely due to operating leverage and cost efficiencies, said Equirus as it expects healthy order intake to continue.

CA Vatsal Vinchhi, an equity analyst for the IT sector at Choice Equity Broking expects a marginal sequential growth for TCS on the back of a strong order book in the BFSI segment.

"It is expected to report about 1 per cent CC QoQ growth amidst delayed discretionary spending. Margins are expected to remain resilient and to be in the range of 24-25 per cent, however, the aspirational range is 26-28 per cent going ahead," said Vinchhi.

In Q3FY24, TCS reported a 4 per cent year-on-year (YoY) rise in its consolidated revenue. In constant currency (CC) terms, the company's revenue rose 1.7 per cent YoY. The company's consolidated profit in Q3 rose 2 per cent YoY.

Five crucial things to watch out for

TCS numbers will influence the mood of the market. But apart from the numbers, investors will also focus on the following five crucial things:

1. The demand outlook

Subdued demand has been one of the biggest factors behind the unimpressive performance of the Indian IT players. Experts point out that TCS' management commentary on the demand outlook in key segments, including BFSI, retail, communication and hi-tech will be in focus.

2. Deal wins in the last quarter

Deal wins, especially large and mega ones, in the last quarter will be under investors' radar as it will indicate how the macro concerns have impacted its clients.

3. Profitability

Experts expect TCS' EBIT margin to remain stable even as operational improvements and cost efficiencies may be offset by low margins in the Indian business.

4. Headcount

In the third quarter of the last financial year, TCS reported an attrition rate of 13.3 per cent which it claimed to be in its range of comfort. TCS’ workforce stood at 6,03,305 as on December 31, 2023, with a diverse workforce. The market will focus on the trends of attrition and fresh hiring.

5. Management commentary

Experts expect TCS' management commentary to throw light on strategic plans under the new CEO, demand outlook and deal pipelines.

"Any strategic plans under the new CEO, insights on IT budgets in 2024, near and medium-term demand outlook in the US and Europe, pricing environment in key markets and segments, and updates on the large/mega deal pipeline would be key monitorable," said Dhruv Mudaraddi, a research analyst at StoxBox.

"Demand outlook in BFSI, retail, communication, hi-tech and other key segments, the impact of macro concerns on its clients, deal pipeline, especially for large and mega size deals, client decision making and pricing trends, outlook on CY24E/FY25E IT budgets and any new strategy update under the leadership of newly appointed CEO will be the key things to look for," said Equirus.

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