TCS to announce Q3 results today, what brokerage houses are expecting

TCS Q3 results today: Kotak Institutional Equities expects the company to register a constant currency revenue growth of 1 per cent after taking an impact of 60 basis points from Chennai floods.

IT major Tata Consultancy Services (TCS) is slated to announce its third quarter earnings on Tuesday. The December quarter for overall IT companies is seasonally weak owing to furloughs and a lower number of working days. This time the woes were compounded by the recent floods in Chennai.

In case of TCS, which has got its largest development centre in Chennai, the expectation from Kotak Institutional Equities is that it would register a constant currency revenue growth of 1 per cent after taking an impact of 60 basis points from Chennai floods.

For the quarter ended December 2015, TCS has already said that floods in Chennai are expected to have a “material impact” on their quarterly revenues. Reliance Securities in a research note said, “Chennai floods are expected to dent the third quarter of IT companies due to material delivery presence of the sector in the region. Revenue impact from Chennai has been estimated at -75 basis points for TCS.”

During July-Sept 2015, the company posted a consolidated net profit of Rs 6,084.66 crore, up 7.05 per cent against Rs 5,684.12 crore in the sequential quarter ended June 2015. Bottomline figures of TCS jumped 16.02 per cent on year-on-year (YoY) basis. The company posted a consolidated net profit of Rs 5,244.28 crore in the corresponding quarter ended September 2014.

According to Religare Securities, TCS with employee strength of over 65,000 in Chennai would be impacted by recent floods in the city. The brokerage house expects the impact to spill over to the broader sector as well.

Gross sales of the company jumped 14.06 per cent YoY and 5.83 per cent on quarter on quarter basis (qoq) during the quarter ended September 2015.

For Oct-December period, Religare Securities expected that TCS may post 1.5 per cent qoq and 12.5 per cent yoy growth in topline. However, bottom lime of the IT major may fall 1.2 per cent qoq. The company may post 9.9 per cent yoy growth in net profit figures for the quarter ended December 2015. According to the brokerage house, TCS may post revenue and net profit of Rs 27,574.50 crore and 5,984.40 crore for the quarter ended December 30, 2015.

HSBC said, “We estimate TCS revenues to grow 1.5 per cent q-o-q in constant currency (ex one-offs) which should be completely offset by negative cross-currency movement and impact of Chennai flood. TCS has the largest presence in Chennai. Ebit (earnings before interest and taxes) margins are likely to decline 100 basis points q-o-q in the quarter marginally offset by rupee depreciation.”

TCS shares hit new 52-week low of Rs 2,313 and closed 1.65 per cent down at Rs 2324.05 ahead of its third quarter earnings announcement.