TCS to flag off the earnings season — here’s what to expect

• Tata Consultancy Service (TCS) is all set to kickstart the corporate earnings season this Friday.
• Rising visa and travel costs, along with supply chain pressures may eat into TCS margins.
• Multiple brokerages expect TCS’s net sales to be a little over ₹52,000 crore this quarter.

Tata Consultancy Services (TCS) kicks off the corporate earnings season this Friday, with analysts expecting India’s top software services firm to post strong growth in the April-June quarter despite stress on its margins. In fact, analysts are expecting robust results from the top players in India’s information technology sector.

Wage hikes, currency volatility and a potential slowdown in international markets like US and Europe could impact the results of the Tata Group subsidiary, according to a report by Emkay published last month.

Increasing visa and travel costs, along with supply chain pressures, could also affect the operating margins.

Multiple brokerages expect TCS’s net sales to be a little over ₹52,000 crore in the first quarter of fiscal year 2023. The net profit expectations are in the range of ₹9,700 crore - ₹9,900 crore, as per Emkay Global, Edelweiss and Prabhudas Lilladher.

Motilal Oswal, on the other hand, expects TCS to cross ₹10,000 crore in net profit this quarter. The brokerage has recommended a buy on TCS shares, with a price target of ₹3,730 apiece.

Brokerage	Q1 Sales estimates	Q1 Profit estimates
Motilal Oswal	₹52,320 crore	₹10,050 crore
Emkay Global	₹52,915 crore	₹9,958 crore
Edelweiss	N/A	₹9,703 crore
Prabhudas Lilladher	52,791 crore	₹9,968 crore

The company had reported profit after tax of ₹9,926 crore on revenue of ₹50,591 crore in the January-March quarter. Overall, TCS had reported a revenue of ₹1.91 lakh crore and a net profit of ₹38,327 crore for the fiscal year 2022.

Investors will need to keep an eye on TCS’ deal momentum, tenure and pricing of contracts, attrition and supply-side pressure, Edelweiss said in a report. TCS’ comments on client budgets and the deal pipeline amid geopolitical uncertainties and a weak macro outlook would be key and will provide insights into the prospects for the entire India’s IT sector.

For the full year ending 2023, TCS is expected to post a net profit of over ₹44,000 crore on revenue of over ₹2.2 lakh crore, according to Emkay Global.

	FY2021	FY2022	FY2023E	FY2024
Revenue	₹1,64,177 crore	₹1,91,754 crore	₹2,23,110 crore	₹2,57,114 crore
Net Profit	₹32,430 crore	₹38,327 crore	₹44,678 crore	₹51,861 crore

Source: Emkay Global
Note: ‘E’ stands for estimates

TCS shares have fallen 15% in value ever since the start of this year, and they closed at ₹3,265 on July 6. The company’s share price declined 13% in April-June 2022, performing better than the Nifty IT index’s 23.14% drop in the same period.

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