New Delhi: Shares of Tata Consultancy Services Ltd (TCS) edged higher on Tuesday, ahead of the company’s June quarter results announcement, rising 0.35% to 1,894. India’s biggest IT company TCS will announce its Q1 FY19 results after market hours today. The TCS top management will address the media at 5.15 pm, followed by an analyst conference call at 7pm. TCS share prices have hugely outperformed the broader market this year, surging about 40%. There has been a re-rating in some IT stocks on expectations that growth will pick up.

The IT index has outperformed the broader markets this year, driven by a depreciating rupee. Expectations are high from TCS and other top-tier IT companies on the earnings front for the June quarter.

“The first quarter is a seasonally strong one for IT companies due to higher billing days and allocation of budgets to programmes. This, along with benefits from currency movement, is expected to result in improved recovery for the sector," market analyst Ambareesh Baliga wrote in a blog post.

Here are five things to watch out for in the TCS Q1 FY19 results:

(1) For the June quarter, TCS is expected to post a net profit of 6,985 crore on revenues of 33,966 crore, according to Bloomberg estimates. HDFC Securities expects TCS to report revenues of $5,063 million, rising 1.8% sequentially and 10.3% year on year. For the March quarter, TCS had reported a net profit of 6,904 crore on net income from operations of 32,075 crore.

(2) The growth outlook from the TCS management with respect to first-half seasonality, large account metrics, performance and outlook in core verticals such as financial services and retail will be key things to watch out for, according to HDFC Securities.

(3) The company’s EBIT (earnings before interest and tax) margin is expected to decline 40 basis points, quarter on quarter, to 25%, affected by wage increases, according to HDFC Securities. This is likely to be offset by rupee depreciation and efficiency gains, it adds. The rupee is down nearly 7% against the dollar so far this year. One basis point is one-hundredth of a percentage point.

(4) TCS rival Accenture Plc’s strong results in the third quarter have put the focus on Indian IT companies. Accenture follows a September-August financial year. “Accenture’s early participation in digital, led by a comprehensive portfolio of offerings across verticals and geographies, is reaping rich dividends. Accenture results demonstrate that the spending environment is robust but requires an optimum portfolio mix and capabilities to capitalise on it. From IT companies’ perspective, the progress made by TCS is impressive," says Kotak Institutional Equities in a note.

(5) The digital business of TCS will be another key focus area for analysts. Greater adoption of digital technologies by customers helped digital engagements contribute 23.8% of TCS’s revenue in the March quarter, rising of 42.8% year on year. “We are seeing strong demand in digital, in security and blockchain, in analytics and data," TCS chief operating officer N. Ganapathy Subramaniam had said after the March quarter results were announced.

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