Rupee to the rescue: TCS quarterly profit might be cushioned by the exchange rate

Tata Consultancy Services campusIANS
  • TCS is expected to show a quarterly growth rate of 2.8%, according to analysts.
  • The company’s operating margins are expected to expand by 50 basis points (bps).
  • The macro environment has been challenging but it should be offset by the rupee depreciation, sustained wages and absence of visa costs.
Tata Consultancy Services (TCS) will be the first of the Indian IT companies to declare its quarterly earnings this season. This quarter, its double digit growth is expected to be under pressure.

Macro slowdown could present challenges for emerging IT demand but analysts from India Infoline (IFFL) Institutional Equities expect it some it to be offset by the recent depreciation of the Rupee.

It also helps that visa costs have not increased further, and wages are sustained at current levels.

Analysts forecast a 2.8% quarterly growth rate for the company and operating margins to expand by 50 basis points or 0.5%.

"Sustenance of healthy growth in communications vertical and recovery in the retail vertical as well as progress on its platform strategy, where TCS is gaining traction in verticals like BFS and life sciences, apart from insurance are key comments to watch," cites IFFL’s report.

The BFS sector is particular is of interest to investors as TCS in the midst of implementing large projects in this space. Its order bookings and commentary from clients will help analysts determine its revenue inflow from such deals.

A lot will also depend on the spending outlook of large US banks.

In the last quarter, TCS reported outsourcing contracts worth $5.7 billion. It was the fourth quarter in a row where it bagged deals worth $5 billion and more.

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