TCS Q4 Preview: Net Profit Growth Likely At 16% YoY, Revenue May Rise 17%

Tata Consultancy Services, India’s largest IT services company, is set to declare its Q4 financial results (January-March 2023) on Wednesday, April 12. The quarter is marked by negative events globally in the banking sector, including the collapse of Silicon Valley Bank. The IT sector has significant exposure to the BFSI sector. According to analysts, TCS is likely to post a net profit growth of around 16 per cent YoY and a revenue growth of 17 per cent YoY.

In the previous quarter ended December 2022, TCS had posted a consolidated net profit growth of 11 per cent YoY to Rs 10,846 crore. Its revenue had risen 19.1 per cent year-on-year to Rs 58,229 crore. On a constant currency basis, TCS’ revenue jumped 13.5 per cent during the December 2022 quarter.

According to a poll of securities by Moneycontrol, TCS’ consolidated revenue is expected to come in at Rs 59,463 crore with a year-on-year increase of 17.5 per cent. Its consolidated net profit is expected to increase 16 per cent YoY to Rs 11,515 crore. In constant currency (cc) terms, securities firms expect growth to range from 0.1 per cent to 1.1 per cent QoQ.

According to a note by analysts at Kotak Institutional Equities, TCS is expected to lead Tier 1 IT pack on growth, led by cost take-outs, wallet share/vendor consolidation gains and strong spending on cloud and digital programs. Exposure to impacted banking clients will not materially impact revenue growth in the quarter. Kotak forecast growth of 1.1 per cent QoQ and 11.2 per cent YoY revenue growth in constant currency terms.

Antique Stock Broking said TCS is expected to post a 14.5 per cent YoY increase in Q4 net profit to Rs 11,366 crore, against Rs 10,846 crore in the year-ago quarter. Another brokerage Nirmal Bang Institutional Equities also expects TCS to post profit growth of 14.6 per cent YoY, which is higher than the 12.7 per cent expected growth for Infosys, 9.3 per cent growth for HCL Tech and flat growth for Wipro.

Another major brokerage ICICI Direct in its report said the Q4 is a seasonally weak quarter for TCS due to fewer working days and some furlough impact in January. “We also cannot rule out some impact (minor) on TCS’ Q4 numbers on account of a surprise change at the top. We expect the company to report 1% CC revenue growth for the quarter. Growth is expected to be driven by continued deal momentum especially in cost take-out deals, cloud transformation and some benefits likely coming from vendor consolidation,” it said.