 "Krithi Krithivasan, CEO, N Ganapathy Subramaniam, COO & ED")
Tata Consultancy Services’ (TCS’) numbers for the second quarter of 2023-24 — the second quarter being a strong one for information-technology companies — reflected macro uncertainties and hinted at soft growth for this financial year.
The TCS board on Wednesday announced a buyback of shares worth Rs 17,000 crore at Rs 4,150 per share. This is the fifth buyback from the company since 2017.
TCS, India’s largest IT services player, reported net profit at Rs 11,342 crore, up 8.7 per cent year-on-year (Y-o-Y). Sequentially net profit grew 2.42 per cent.
Revenues for the quarter came in at Rs 59,692 crore, up 7.9 per cent Y-o-Y but marginally high sequentially.
TCS missed the Bloomberg estimates on both revenues and net profit. Bloomberg had estimated revenues at Rs 60,353 crore and net profit at Rs 11,409 crore.
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With a second straight quarter of soft growth, achieving double-digit growth for the full financial year looks difficult. For most top-tier IT services firms, growth is driven by the first half of the financial year.
However, the company’s order book remains strong at $11.2 billion. This was the third consecutive quarter when it came in around $10 billion.
“We displayed strong execution in the face of continued macroeconomic uncertainties. The trends are similar to last quarter, clients want to invest in newer technologies, and hence technology adoption is high. And given the macroeconomic headwinds, clients are looking at cost-optimisation projects. We have been able to win many deals,” said K Krithivasan, chief executive officer and managing director, during the media briefing.
He, however, added there were deals getting deferred.
“We are not fully compensating for de-growth because clients are still optimising. Some ongoing projects are pausing and some deferrals are happening,” said Krithivasan.
This is one of the reasons that despite an all-time high order book, top line growth is soft.
Growth for the quarter was affected due to a drag in the BFSI (banking, financial services, and insurance) vertical and the US market.
The BFSI vertical was down 0.5 per cent Y-o-Y and North America grew a mere 0.1 per cent. Europe, which has been affected by the Ukraine conflict, saw moderate growth sequentially.
The UK continued to be a growth driver, outperforming others with 10.7 per cent expansion Y-o-Y.
Among the verticals, energy, resources and utilities led growth at 14.8 per cent Y-o-Y, followed by manufacturing at 5.8 per cent.
Attrition came down. For the quarter, it was at 14.9 per cent. However, the company saw one of its largest headcount drops at 6,333. The last time the company saw a drop in the headcount was in Q3 FY23, when it fell by 2,197.
“We hired a lot of people over the last two to three years and we have been investing in fresh talent. With that talent coming on-stream and with reduction in attrition, we were able to recalibrate our gross additions, keeping it below the departures during the quarter,” said Milind Lakkad, chief human resources officer.
On Generative AI, the company has over 250 opportunities in the pipeline and has trained 100,000 employees in the field.
When asked if the Israel-Hamas conflict would impact the firm’s business, the company said the harm would be negligible but it was worried about the employees in the region and was in constant contact with them.
“We will see how it evolves and the safety of our employees is a primary factor in deciding that (whether to keep them there). A good number of the 250 employees are locals and some are from India and other countries based there for project execution. We will calibrate that as we move ahead,” N Ganapathy Subramaniam said.
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