Will TCS be ahead of Infosys, Wipro?

MUMBAI, INDIA: After Infosys' exciting Q1 performance, analysts and investors have set their eyes on TCS, which will announce its Q1 results later in the day.

“Infosys’ revenue growth for 1QFY13 was lower than estimates largely due to a one-time reversal of $15 million of revenues from one client because of prudence. Volumes were up by 2.7 percent Q-o-Q, which was above our estimates,” said Dipen Shah, head of PCG (Private Client Group) Research, Kotak Securities.

Also read: Infosys Q1 profit rises 33 pc

“The reduction in productivity was a negative surprise, though a part of it was due to a change. The reduced growth guidance is largely due to cross currency impact and lower realizations rather than volumes, we understand. We believe growth rates for Infosys will improve at a faster pace, once there is revival in the industry growth,” Shah added.

Though Infosys numbers were not so impressive, analysts are highly backing TCS and expect the company to lead the race for the Q1, F2012-13.

According to Sanjeev Hoota, analyst at ShareKhan securities, TCS is expected to put a good show compared to Infosys.

“We expect revenue around $ 2726.1 million with a 2.9 percent growth Q-o-Q and in rupee terms it will be 11 percent Q-o-Q. And overall TCS is expected to have 4 percent volume growth for Q1,” Hoota said.

“Given the currency volatility during the past month, TCS will have a good currency benefit which will flow to the margins. However, since TCS will offer salary hike as well as the visa cost, the currency benefit will not have a big impact,” Hoota added.

Hoota, however, confidently said that TCS’s topline growth is going to lead from the front among its peers.

“TCS should have better numbers than Infosys and Wipro; also Infosys has lowered its guidance,” said Rohit Anand, analyst at PINC Research.

“In case of Infosys, currency volatility had a negative impact on margins due to Euro zone crisis, however it might not be the case with TCS as both companies have different exposure to the Europe market and the impact will vary,” Anand pointed out.

During the quarter, rupee has declined by 9 percent against US dollar and it will impact earnings.

“However, TCS will have a high volume growth compared to Infosys but will be impacted by salary hikes and cost of visas but it’s a positive impact. Having said that TCS margin will be more or less stable compared to Infosys,” Anand explained.

While the analysts and market sentiments look positive on TCS but one needs to wait and watch till the company announces Q1 numbers in the evening today.