1. TCS shares sluggish ahead of Q4 results; 5 things to watch

TCS shares sluggish ahead of Q4 results; 5 things to watch

Tata Consultancy Services, India’s largest Information Technology Services exporter is expected to report "sustained" growth numbers for the fourth quarter of Financial Year 2016-17, according to analysts' consensus, continuing the momentum from the third quarter.

By: | Published: April 18, 2017 2:35 PM
TCS shares remained sluggish today, imitating yesterday’s muted performance. Shares rose 0.05% to Rs 2322.10 as investors remained cautious about the results.

Tata Consultancy Services, India’s largest Information Technology Services exporter is expected to report “sustained” growth numbers for the fourth quarter of Financial Year 2016-17, according to analysts’ consensus, continuing the momentum from the third quarter. TCS shares remained sluggish today, imitating yesterday’s muted performance. Shares rose 0.05% to Rs 2322.10 as investors remained cautious about the results.

Here are five things that will play on the investors’ mind with the results due later today

1. Revenue Guidance for the upcoming year

After the second largest IT services exporter Infosys forecast lower growth in the FY18, TCS’s commentary on revenue guidance will suggest how the Indian IT industry will fare against the challenges it is facing.

2. H1-B Visa Issue

US President Donald Trump is expected to sign on Tuesday a presidential order against H1-B visas, a move that could hurt Indian IT services firms. It will be interesting to watch to what extent TCS expects to be affected by the shortage of H1-B visas. Already the company has reduced its dependence upon work visas, evident from the fact that in the last one year it had applied for one-third of the visas as it had applied for in the previous year.

3. Appreciating Rupee

During the last quarter, the rupee has appreciated significantly against the US dollar which will impact the operating margins of IT services companies as they get paid by their clients in US dollars. Gautam Duggad, Head of Research at brokerage firm Motilal Oswal says, “While a strong Rupee may bring down operating margin by 20-30 basis for the fourth quarter of FY17, if this sustains for long the earning estimates will be further moderated”. Therefore TCS commentary on steps to negate adverse currency fluctuations will be important.

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4. Share Buyback Offer

Tata Consultancy Services shareholders on Monday approved a proposed mega share buyback worth up to Rs 16,000 crore. TCS had announced this buyback in February, at a share repurchase price of Rs 2850. Last week Infosys had also announced a share buyback of RS 13,000 crore, which was deemed to be insufficient in quantum and therefore failed to cheer up investors. It will be interesting to see how TCS shareholders react to its share buyback offer.

5. Management Change

Rajesh Gopinathan was elevated to the post of Chief Executive Officer (CEO) effective 21 February 2017 after the erstwhile CEO Natarajan Chandrasekaran became chairman of Tata Sons. Gopinathan has earlier served as the chief financial officer of TCS and with him now being at the helm, it will be important to observe TCS growth guidance for FY18, which is expected to be around 9.5% in constant currency terms as per estimates reported by brokerage firm Motilal Oswal. Gopinath’s commentary on measures to deal with visa restrictions and the overall global business environment will be keenly watched.

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