TCS Q1 FY17 results: Six things to watch out for
Brexit, wage hikes, rise in visa costs, currency volatility and softness in Diligenta and Japan, are likely to impact the revenue growth in first quarter of FY17.
Tata Consultancy Services (TCS), largest IT firm of the country, will announce financial results for the first quarter ended June 30, 2016 on July 14. The company beat street estimates in Q4 FY16 and is expected to continue the momentum in FY17 driven by digital growth. Q1 is traditionally a strong quarter for IT companies. However, Brexit, wage hikes, rise in visa costs, currency volatility and softness in Diligenta and Japan are likely to impact the revenue growth in first quarter of FY17.
Here are six things to watch out for:
Brexit: Brexit is likely to impact TCS as about 26% revenue of the company is generated from Europe. "Changed economic conditions due to Brexit could impact TCS the most on account of 14% GBP exposure," a global brokerage firm was quoted as saying.
Wage hikes: TCS CEO N Chandrasekaran's compensation rose 20% to Rs 25.6 crore in FY16 and he received an additional Rs 10 crore as one-time special bonus, as per reports. The company announced hike of 8% to 12% for the employees in India whereas 2-6% hike for the employees in other regions in FY17.
Digital revolution: Digital revenues of the company grew at 15.5% in Q4 FY16, registering a digital growth of 52.2% yoy. While announcing Q4 results, N Chandrasekaran said, “I am very happy with the Digital growth. Digital is going to be the future. I see the momentum to continue with the deal wins we are seeing in this space.”
Chairman Cyrus Mistry, addressing 2016 Annual General Meet, said that the company is well positioned to lead the digital revolution. “The company has been investing heavily to train, acquire talent and building intellectual property in digital services," he said.
Softness in Diligenta and Japan: TCS does not expect Diligenta business to decline further however the company said that Japan business will need some time to stabilize.
BFSI and other segments: Although the company is seeing good traction in the BFSI sector since last quarter, Brexit may how an impact on BFSI revenues. Media and Telecom remain a matter of concern, however he company does not see a major headwind in these two segments.
Lower recruitment in FY17: The company, during the announcement of Q4 results, said that their lateral recruitment for FY17 will be much lower than FY16 due to less attrition and focus on automation. Attrition rate has dropped 14.5% in FY16 and is expected to decline further.