Key things to watch out for in TCS Q3 results

IT major Tata Consultancy Services will be announcing its third-quarter results later today, amid global headwinds and slowdown in the US economy. Here are the five things to watch out for in the results:

Impact of rupee volatility and global slowdown:

The Rupee continued to be volatile in the 3rd quarter of the current financial year. It touched an all-time low during the first month of the bygone quarter, against the US dollar. However, as the quarter went by, the rupee continued to be volatile. TCS’ 53.84% revenue comes in US dollar terms, and the average conversion rate of the company’s revenues during Q2 stood at 70.67. So, the analysts and shareholders need to watch out for the impact of rupee on the company’s revenues in this quarter. Also, as a slowdown has plagued the US economy, and Theresa May still not being able to get a deal for Britain on Brexit, it is interesting to know how these factors will impact company’s top-line. In this scenario, management commentary on this front will also hold a lot of significance.

Recruitment:

Recruitment in the country’s IT/ITeS space seems to have picked up in the current financial year, after a tumultuous 2016-17. In the first two quarters of the current financial year, the company upped its headcount by 16,104 people. It has also announced plans to hire over 28,000 freshers from the college campuses in last the last quarter. So, it would be interesting to watch out for progress on this front.

Merger Plans:

India’s IT space of late has been plagued with various acquisition – be it big-ticket buyout of IBM’s select software products or the small ticket acquisitions of Infosys aimed at enhancing its capabilities in the emerging technologies vertical. After remaining low on M&A front since 2013, the IT major bought out two companies – The BridgePoint Group and W12 Studios – in Q3 of the current financial year. It would also be interesting to see what the company has to offer on M&A front.

Shareholder offerings:

IT companies in India have been offering a lot of doles to its shareholder recently, in a bid to create more and more shareholder’s wealth after years of strengthening their cash reserves. Be it bonus issues, special dividend or the buy-backs, IT companies have been at it. In June 2018, the company approved a proposal to buy-back up to 76.19 crore equity shares of the company for an aggregate amount Rs 16,000 crore at Rs. 2,100 per scrip. It would be interesting to note that whether the IT behemoth has some more surprises up its sleeve for the shareholders.

Digital revenues:

The Tier-I IT companies in India have prioritised their digital businesses. TCS has taken a lead in that. Digital contributed 28.1% of the company’s revenues in the second quarter of the current financial year, with a whopping annual jump of 59.8%. The company’s progress in this space would be keenly watched out for, according to the analysts.