TCS share price jumps 3%, nearly 52 weeks higher on buyout news; Q3FY22 Result This Week, Modest Revenue Growth Expected

The TCS share price climbed more than 3% to Rs 3,979.90 a piece on BSE on Monday, after the company informed that its board of directors would consider a share buyback proposal when its meeting to be held on January 12.

The TCS share price climbed more than 3% to Rs 3,979.90 a piece on BSE on Monday, after the company informed that its board of directors would consider a share buyback proposal when its meeting to be held on January 12. This will be the company’s fourth buyout in at least six years. The latest buyback of the company, valued at Rs 16,000 crore, opened on December 18, 2020 and closed on January 1, 2021. More than 5.33 crore of shares were repurchased as part of the ‘offer for Rs 3,000 each. Also in 2017 and 2018, TCS carried out a similar share buyback. The stock was trading near its 52-week high of Rs 3,990 apiece, just 0.2%.

The TCS Board of Directors will publish results for the third quarter and the nine months ended December 31, 2021 on Wednesday. The Board of Directors will also review the third interim dividend. The IT barometer set January 20, 2022 as the date for recording the dividend. Analysts say the third quarter is generally a seasonally weak quarter for IT companies due to holidays and lower work days, and they expect all companies to see strong quarterly revenue performance, driven by the need faster digital transformation, faster revenue conversion and positive bias. pricing.

TCS Q3FY22 Snapshot: What to Expect in Q3?

Nirmal Bang: Nirmal Bang analysts expect TCS to record 3.5% sequential growth in CC revenue, supported by the deals it has won in the past 12 months. They added that the total contract value (TCV) needs to be watched closely, as the number of base quarters was the lowest among recent quarters ($ 6.8 billion). Accenture’s most recent TCV count of $ 16.8 billion was the highest on record, beating the second best of $ 800 million. The research and brokerage firm believes at least mid-teens growth should be seen here for TCS. On the margin front, TCS indicated short-term pressure on the supply side. While attrition is expected to increase sequentially, Nirmal Bang still believes she will be the best in the business. “But, we think TCS is probably feeling the ‘Accenture’ effect on hiring and the cost pressures will peak in FY22 before easing off in FY23. For 3QFY22, we think that margins will decrease sequentially due to backfill costs and perhaps lower utilization, “he added. More color on the progress in the” growth and transformation “part of his business, in particular given the extremely strong growth observed in the discretionary spending (consulting) part of Accenture’s business.

Kotak institutional actions: Analysts expect TCS to show modest sequential growth of 2.6% and lower EPS growth than teens. December is a seasonally low quarter impacted by holidays. The research firm anticipates large-scale growth. He expects year-over-year growth to moderate as the benefits of a weak base wear off. “We expect the EBIT margin to decline sequentially and annually due to increased discretionary costs and the high cost of backfill attrition. We are forecasting $ 7.5 billion TCV fueled by mid-size deals. We do not expect a distortion of the TCV of mega-chords, ”he added. The research firm expects investors to focus on the reasons for the relative underperformance of growth rates, the reasons for the lack of momentum for large deals and the best way to read TCV signatures, the how long the challenges on the supply side will persist and the measures to manage them, the levers to defend the margins and the timing when the EBIT margins hit the 26-28% band, the sustainability of growth and the The magnitude of the opportunities due to aggressive change to the cloud by customers, and indications of IT spending for CY2022E and whether they match the optimism shown by industry analysts.

Edelweiss: Analysts expect TCS to report 3.5% constant currency QoQ USD revenue growth. TCS, being the market leader, is likely to be a key beneficiary of grassroots transformation; accelerate cloud adoption; and digital adoption. In addition, the continued loss of market share by key players such as Capgemini and Cognizant would directly benefit TCS. “Investors can pay attention to the dynamics, duration and prices of transactions; comment on attrition / pressure on the supply side; commentary on the demand trajectory by segment, in particular for retail, travel and product engineering services; and hiring plans. We expect the company to provide an update on the trend in industry demand, budget and customer risk, if any, and the rate of attrition, ”he added.

Prabhdas Lilladher: TCS has announced a number of 11 significant contracts in the third quarter of fiscal 22 so far. Analysts expect 2.5% growth in the quarter in USD, driven by widespread growth across all verticals. Growth is modest given the weak seasonal quarter affected by the holidays, they said. TCS continued to have strong transaction momentum and the research firm expects US $ 7.5 billion from TCV this quarter. Deal TCV is expected to include medium and small sized transactions. He expects a slight increase in margins of +40 basis points in QoQ thanks to the benefits of pyramid optimization and cost optimization measures. “We expect investors to focus on the demand trend across all verticals; accelerate the timeline of large transactions; update on prices; pipeline of major deals and reasons for the lack of mega-deals; supply issues, hiring trends, salary increases and its impact on future margins; and customer IT spending budgets for CY22E.

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