TCS Q2 Poll: Profit may rise 19% at Rs 4,527 cr QoQ

India's largest software services exporter Tata Consultancy Services (TCS) will declare its July-September quarter (Q2FY14) results on Tuesday evening. A CNBC-TV18 poll shows analysts on an average expecting profit after tax to rise 19.25 percent sequentially to Rs 4,527 crore in second quarter.

The company has been a consistent performer in the technology space. Investors will closely watch TCS' quarterly earnings after its rival Infosys reported higher-than-expected revenues in Q2 and surprised the street by revising FY14 guidance to 9-10 percent from 6-10 percent earlier.

Analysts believe dollar revenues of the software company (TCS) may increase 5.5 percent quarter-on-quarter to USD 3339 million and rupee revenues are likely to jump 15.9 percent Q-o-Q to Rs 20,850 crore in the quarter gone by.

Earnings before interest and tax (EBIT) are expected to surge nearly 26 percent sequentially to Rs 6,120 crore and EBIT margin may soar 232 basis points to 29.35 percent in September quarter as against 27.03 percent in June quarter. During the quarter, Infosys had reported flattish EBIT margin of 23.6 percent.

The street continues to expect a sector leading performance from the company as TCS, in its analysts' concall in September, sounded positive and said September was a good quarter for the company.

What to expect from Q2

Dollar revenue growth seen up 5.5 percent

Analysts expect around 50 bps impact of cross currency headwind. Hence, constant currency growth is seen higher at 6 percent.

They expect organic growth of 4.5 percent. Growth is expected to be purely volume-driven, while pricing is seen flat during the quarter.

Margin improvement due to rupee depreciation

TCS had increased its wages effective April 1 itself, so there is no impact of wage hike in September and full benefit of currency can flow through margins, feel analysts.

The management, in its analysts' concall in September, had said there could be a hedging loss of Rs 550-700 crore if the rupee closes at 65-68 per dollar, but closing exchange rate is at about 62.6 per dollar. Hence, analysts expect hedging loss lower at around Rs 350 crore in September quarter.

The stock on Monday closed at its record high of Rs 2,214.65, up 4.27 percent ahead of its earnings.

Meanwhile, there was a buzz on the street that TCS is looking to merge CMC or Tata Elxi with itself. TCS holds 51.12 percent stake in CMC and 45.1 percent in Tata Elxsi.