Tata Consultancy Services Ltd (TCS) and Infosys Ltd, the top two domestic software exporters, are gearing up to announce their financial results for the December quarter on Thursday, January 11. In addition to the quarterly results, the board of TCS is set to discuss the possibility of paying an interim dividend for the fiscal year 2024. Analysts are maintaining modest expectations for the quarterly results, considering factors such as increased furloughs in the seasonally weak quarter, the impact of wage hikes on margins, and a cautious outlook prevailing in the industry.
Sharekhan anticipates an 8% year-on-year decline in net profit for Infosys, while TCS is expected to record an 8.2% growth in profit on a year-on-year basis. Both companies are likely to report a decrease in year-on-year operating profit margin, with Infosys facing a potential decline of 100 basis points, according to Sharekhan. On a sequential basis, TCS may witness an improvement in margins. In terms of revenue, Infosys is projected to report flat sales, while TCS is expected to reveal a 3.2% increase in revenue in rupee terms, as stated by Sharekhan.
Sharekhan suggests that TCS's revenue growth might be muted at 0.3% in constant currency terms due to furloughs, balanced by contributions from the BSNL deal. Operating margins for TCS are likely to see a quarter-on-quarter improvement of 25 basis points, supported by operating efficiencies, though partially offset by subdued revenue growth. On the other hand, Infosys is predicted to experience a 1.8% revenue decline in constant currency terms due to cuts in discretionary spending and furloughs, with approximately 20 basis points of cross-currency headwinds. Infosys's EBIT margins are expected to decline by 95 basis points quarter-on-quarter due to wage hikes and weaker revenues.
Axis Securities forecasts a 6.6% year-on-year rise in TCS's profit at Rs 11,561 crore, accompanied by a 4.1% increase in sales at Rs 60,594 crore. For Infosys, it anticipates a 7.6% year-on-year drop in profit at Rs 6,087 crore, coupled with a 1.4% rise in sales at Rs 38,844 crore.
