BackTCS confident of achieving double-digit revenue growth in FY23
For the first half of this financial year, the Tata Group company's topline has surged 17.1% to ₹1.08 lakh crore
PremiumThe country's largest IT services exporter Tata Consultancy Services (TCS) on Tuesday said that it is confident of achieving a double-digit revenue growth in the current financial year and will be targeting a similar performance in FY24 as well.
Speaking to news agency PTI, a senior executive said TCS' ability to achieve the number in FY24 will hinge on how the macroeconomic situation, including geopolitical tensions, commodity price pressures, inflation and financial tightening worries, play out.
"(For) this year (FY23), probably we are there (double-digit growth). What we need to do is that in the remaining quarters, we just have to maintain the run rate and we will be able to achieve that, not a problem. In FY24, it is too early to call. The target is to stay on the double-digit growth," Chief Operating Officer N Ganapathy Subramaniam told PTI.
For the first half of this financial year, the Tata Group company's topline has surged 17.1% to ₹1.08 lakh crore.
TCS on Monday reported an 8.4% growth in its September quarter net profit at ₹10,431 crore, crimped by a dent on margins.
Operating environment 'challenging'
The Tata group firm, however, said the operating environment is "challenging" and warrants "vigilance", even though the headwinds posed by factors like recession in its biggest market US, rising inflation around the world and currency volatilities are yet to materialise into its order pipeline.
TCS also said that it was seeing some softness in long-term deal decision making.
"Europe is a very uncertain environment," Chief Executive Rajesh Gopinathan told a press conference.
"(We) have to wait and see how the winter pans out ...if there are production cuts that will roll across multiple industries," he said.
The reporting quarter saw an 18% jump in revenue to ₹55,309 crore as against ₹46,867 crore in the year-ago period, but it was a 1.60 percentage points narrowing in the operating margin to 24% which crimped the profit growth.
Meanwhile, Subramaniam said that demand for IT services continues to remain strong.
To a query about worries surrounding high inflation and rate tightening in its biggest market of US, he said consumer behaviour does not point to a recession.
The space to watch out for is Europe, which is bracing for a tough winter because of the energy supply challenges, Subramaniam said, adding that this can impact the manufacturing sector if factories stop working.
TCS does not have a high reliance on the sectors which potentially stand to get impacted, he added.
The firm is well placed to keep achieving the Total Contract Value (TCV) of $7-9 billion per quarter for the next few quarters but the same will have to go up eventually in order to realise its longer term revenue growth aspirations.
The $7-9 billion TCV per quarter is good till it reaches $28 billion in annual revenues but the new deal wins will have to go up to $10 billion and beyond, Subramaniam added.
The company aims to double revenues to $50 billion by 2030.
TCS has not changed its strategy on acquisitions, and will continue to be selective on the inorganic growth opportunities, he said.
"We are not averse to acquisitions but it has to add value to us either from an IP (Intellectual Property) perspective or from a customer base perspective. We do not want to acquire just people but we need to have a corresponding asset," he said.
On the profitability front, Subramaniam said the company has multiple levers which can be deployed to up the operating profit margin to the target of 25%.
He said utilisation has come down recently from a high due to a very high hiring while there also exist other aspects like currency and pricing which will be looked at.
"Typically, we used to operate at 90% (on utilisation), we are now at about 83%. So, the 7% cushion that we have can contribute to better utilisation and increasing revenue and bottomline," he said.
When asked about competition from pure-play consultancy firms, he acknowledged that both TCS and such firms which have built digital practices are vying for the same business.
"They have a consultative background, so their ability to... articulate and package will be much better than what we are doing. They are groomed to sell... but on execution, we will be superior. Finally, customers pick one of these two," he said.
Shares of TCS on Tuesday closed at ₹3,064.00 apiece on the NSE, a day after announcing its September quarter earnings.
With agency inputs
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