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PremiumTata Consultancy Services (TCS) missed street's estimates for the fourth quarter of FY23. The IT giant garnered a consolidated PAT of ₹11,392 crore in Q4FY23, registering a growth of 14.8% YoY. Meanwhile, its revenue from operations stood jumped by 16.9% YoY to ₹59,162 crore. TCS also declared a final dividend of ₹24 per equity share for the fiscal year. TCS' share price gained by 1% on Wednesday with Q4 earnings in focus.
Tata Consultancy Services said on Wednesday fourth-quarter results were weaker than it had expected as some of the IT company's clients in the North American banking space deferred project spending amid the U.S. financial crisis.
India's top IT exporter flagged "a lot of uncertainty" in its banking, financial services and insurance segment over the near-term in the North American market as clients rushed to conserve cash.
"The quarter has come out weaker than what we originally anticipated and primarily coming out of North America," TCS CEO Rajesh Gopinathan said in a media conference.
While announcing its earnings for the fourth quarter ended 31 March, 2023 (Q4FY23), Indian software giant Tata Consultancy Services (TCS) has declared a final dividend of ₹24 per equity share for the financial year 2022-23. Read More
Shares of India's top IT exporter Tata Consultancy Services (TCS) plunged in Thursday's opening deals after the software giant's fourth quarterly profit missed analysts' estimates as cautious clients curtailed technology spending to prepare for a cooling economy. Read More
TCS has declared a final dividend for FY23 to the tune of ₹24 per equity share. TCS is among the kings of paying high dividends to its shareholders for the past years. In FY23, TCS has given one of the highest dividends.
Prior to the final dividend, TCS has paid three interim dividends so far in FY23 to 9,100% aggregating to ₹91 per share. Read More
IT major Tata Consultancy Services (TCS) says it onboarded over 44,000 freshers and its highest-ever number of experienced professionals.
The company said that it will honor all job offer, said TCS in its regulatory filing. Read More
Samir Seksaria, Chief Financial Officer, said: “FY 23 was a year of transition, as supply-side challenges abated while pandemic-depressed travel and discretionary spends normalized. We navigated this change well, without slowing down our investments in our people, research and innovation and intellectual property. Our longer term competitiveness remains intact, giving us industry-leading profitability even as we pursue our growth aspirations."
Tata Consultancy Services Ltd missed analysts’ earnings estimates as clients, especially banks, turned abruptly cautious about spending amid a crisis in the US and Europe.
Net profit rose 15% to ₹11,392 crore in the March quarter, TCS said in a statement on Wednesday. Profit rose 5% from the preceding three months. Analysts had estimated a profit of ₹11,530 crore on average, according to a Bloomberg poll. Sales rose 17% to ₹59,160 crore. Read More
TCS industry-wise performance in Q4: Growth in Q4 was led by Retail and CPG (+13%) and Life Sciences and Healthcare (+12.3%). Other verticals grew in the single digits. Technology & Services grew 9.2%, BFSI grew 9.1%, Manufacturing grew 9.1% and Communications & Media grew 5.3%.
For full-year FY23, growth was led by Retail and CPG (+19.7%) and Communications & Media (+14%). All other verticals showed growth in a narrow band around the company average. Technology & Services grew 13.7%, Life Sciences and Healthcare grew 13.3%, Manufacturing grew 13%, and BFSI grew 11.8%.
Milind Lakkad, the Chief Human Resources Officer, said the company is maintaining the 40,000 freshers-hire target for FY24 and has already made 46,000 offers. The salary revisions will be like usual, and the top performers will get a 12-15 per cent hike
"The quarter has come out weaker than what we originally anticipated and primarily coming out of North America," TCS CEO Rajesh Gopinathan said in a media conference.
Tata Consultancy Services Ltd. did not achieve the expected profit for the quarter, as their clients were being careful with their technology spending in anticipation of a slowdown in the economy.
TCS reported a net income of 113.9 billion rupees ($1.4 billion) for the fourth quarter ending in March, which is a 15% increase from the previous year. However, this fell short of the analysts' estimate of 115.3 billion rupees on average. Despite this, TCS's sales increased by 17% to 591.6 billion rupees.
"TCS reported subdued performance in 4QFY23 with EBIT margin coming in at 24.5%, 59bps below our estimate of 25.1% while its PAT is slightly below our estimate by 1.1%. EBIT grew by 1% QoQ (up 15% YoY) to Rs145 billion while EBIT margin stood at 24.5% (flat QoQ /down 47bps YoY), 59bps below our estimate of 25.1%. Revenue grew by 2% QoQ/8% YoY in USD terms to US$7,195mn, vs. our estimate of US$7,221mn. Revenue growth in CC terms stood at 10.7% YoY. Its net income stood at Rs114bn (up 5% QoQ/ up 15% YoY) on the back of higher non-operating income, which grew 20% YoY and 126% QoQ. Adjusted margin came in at 19.3%, broadly in line with our estimate of 19.4%," says Mitul Shah - Head of Research at Reliance Securities
Events like the fall of Silicon Valley Bank and fears of a contagion have impacted client sentiments in North America and the banking, financial services and insurance sector in particular, leading to clients deferring spends, TCS said.
The IT company's chief operating officer N. Ganapathy Subramaniam said on Wednesday there are no big budget cuts but clients have adopted a strategy of “spending wisely" due to the impact on the sentiment, and are deferring spends.
"The company has not managed to sustain its margins, though, for FY23, we see a steep decline of ~200 bps. Growth has been subdued for the quarter with the BFSI segment reporting single-digit growth and ending the year lower compared to the guidance. However, the order book of $10 Billion is at an all-time high, indicating optimism about growth in the IT sector. With the substantial decline in attrition rate, operational costs optimised and the order book remaining strong, it remains to see how FY24 paves out."
"Revenue for the quarter stood slightly below our expectations at Rs. 59,162 Cr. and showed a growth of 1.6% QoQ. Growth in Q4 was led by Retail and CPG (+13%) and Life Sciences and Healthcare (+12.3%). Other verticals grew in single digits. Technology Services grew 9.2%, BFSI grew 9.1%, Manufacturing grew 9.1% and Communications & Media grew 5.3%. EBIT margins came flat at 24.5% QoQ and net profit for the quarter stood at Rs.11,392 Cr., reporting revenue of 14.8% YoY."
"TCS reported subdued performance in 4QFY23 with EBIT margin coming in at 24.5%, 59bps below our estimate of 25.1% while its PAT is slightly below our estimate by 1.1%. EBIT grew by 1% QoQ (up 15% YoY) to Rs145 billion while EBIT margin stood at 24.5% (flat QoQ /down 47bps YoY), 59bps below our estimate of 25.1%. Revenue grew by 2% QoQ/8% YoY in USD terms to US$7,195mn, vs. our estimate of US$7,221mn. Revenue growth in CC terms stood at 10.7% YoY. Its net income stood at Rs114bn (up 5% QoQ/ up 15% YoY) on the back of higher non-operating income, which grew 20% YoY and 126% QoQ. Adjusted margin came in at 19.3%, broadly in line with our estimate of 19.4%."
Tata Consultancy Services (TCS) posted healthy growth in Q4 of FY23, however, it broadly missed the street's expectations for the quarter. TCS stock will react to the fourth quarter earnings on Thursday. Among the positive factors for the stock would be the final dividend of FY23, an all-time high deal, and a continued downside trend in attrition rate. But the stock may come under pressure as TCS PAT growth is below estimates, could not sustain margins, and the BFSI segment seeing single-digit growth.
Mitul Shah - Head of Research at Reliance Securities said, "TCS reported subdued performance in 4QFY23 with EBIT margin coming in at 24.5%, 59bps below our estimate of 25.1% while its PAT is slightly below our estimate by 1.1%." Adding he said, "EBIT grew by 1% QoQ (up 15% YoY) to Rs145 billion while EBIT margin stood at 24.5% (flat QoQ /down 47bps YoY), 59bps below our estimate of 25.1%." Read more
On TCS earnings, Manish Chowdhury, Head of Research at Stoxbox said, "TCS's fourth-quarter numbers are mostly on the disappointing side. In a difficult operating environment, the company reported revenue growth at a multi-quarter low. The company also surprisingly reported flat EBIT margins versus expectations of an improvement. We feel that the North American business remains weak which is visible from dismal net additions in the workforce. The difficult macroeconomic environment is clearly evident from the cautious commentary of the management and would take few quarters before we see normalization in the overall business performance."
N Ganapathy Subramaniam, Chief Operating Officer and Executive Director, said: “During Q4 and through the year, we successfully delivered transformation programs of varying size and scale. Cloud and Data continue to generate huge demand both internally from a talent perspective and externally from a solutions point of view. We are embracing AI/ML holistically in our execution methods to leverage the huge data and metrics that we have on our delivery performance over decades, to generate insights and raise the bar on quality and experience to our clients."
Samir Seksaria, Chief Financial Officer, said: “FY 23 was a year of transition, as supply-side challenges abated while pandemic-depressed travel and discretionary spends normalized. We navigated this change well, without slowing down our investments in our people, research and innovation and intellectual property. Our longer term competitiveness remains intact, giving us industry-leading profitability even as we pursue our growth aspirations."
TCS announces its Q4 results after market hours on Wednesday. Ahead of the quarterly earnings report, both Sensex and Nifty 50 extended their gains for eight consecutive days. IT stocks rallied with broad-based buying across the basket. However, TCS missed Street's expectations in Q4 despite posting double-digit year-on-year growth in revenue and PAT. How may markets react on Thursday?
Read here: How stock markets will react to TCS earnings on Thursday?
Milind Lakkad, Chief HR Officer of TCS said:
"As we grow the TCS family, I want to call out the stellar role played by our recruitment team in swiftly scaling up hiring, and onboarding the best available talent, enabling TCS to meet its delivery commitments and capture growth. We are honoring all job offers, and have added 22,600 employees on a net basis in FY 23. During the year, we onboarded over 44K freshers and our highest-ever number of experienced professionals. We also doubled down on organic talent development, obtaining over 53K cloud certifications during the year, bringing the total to over 110K employees certified on hyperscaler platforms. This places us among the top 2 partners for the largest cloud providers."
TCS has declared a final dividend for FY23 to the tune of ₹24 per equity share. TCS is among the kings of paying high dividends to its shareholders for the past years. In FY23, TCS has given one of the highest dividends.
Prior to the final dividend, TCS has paid three interim dividends so far in FY23 to 9,100% aggregating to ₹91 per share.
Read here: TCS declares final dividend of ₹24 per share for FY23. Key details here
On geographical basis, TCS' top-line front in Q4 was driven by UK which grew 17%. North America grew 9.6% while Continental Europe grew 8.4%. Among emerging markets, Latin America grew 15.1%, India grew 13.4%, Middle East & Africa grew 11.3% and Asia Pacific grew 7.5%.
For full year, among major markets, North America grew 15.3%, UK grew 15% and Continental Europe grew 11%. In emerging markets, Latin America grew 17.3%, India grew 14.6%, Middle East & Africa grew 7.8% while Asia Pacific grew 7.6%.
TCS industry-wise performance in Q4: Growth in Q4 was led by Retail and CPG (+13%) and Life Sciences and Healthcare (+12.3%). Other verticals grew in the single digits. Technology & Services grew 9.2%, BFSI grew 9.1%, Manufacturing grew 9.1% and Communications & Media grew 5.3%.
For full-year FY23, growth was led by Retail and CPG (+19.7%) and Communications & Media (+14%). All other verticals showed growth in a narrow band around the company average. Technology & Services grew 13.7%, Life Sciences and Healthcare grew 13.3%, Manufacturing grew 13%, and BFSI grew 11.8%.
TCS on Wednesday said that Chief Executive Officer K Krithivasan will take over the post on 1 June, 2023. He has been appointed for a period of five years. Krithivasan will be succeeding Rajesh Gopinathan.
Rajesh Gopinathan, the outgoing Chief Executive Officer and Managing Director, who will be staying on till September 15 said that leadership transition over the next few months is smooth and seamless to all stakeholders.
In terms of employee headcount, the TCS workforce stood at 614,795 as on March 31, 2023, a net addition of 821 in Q4 and 22,600 for the year. The workforce continues to be very diverse, comprising 150 nationalities and with women making up 35.7% of the base.
The company's IT services attrition on an LTM basis continued to trend down and was at 20.1% in the fourth quarter of FY23. Earlier, in the preceding quarter, the rate was 21.3% – its a drop of over 1%.
Milind Lakkad, Chief HR Officer at TCS said,"My answer is simple, yes, 40,000 stands.. campus offers. In fact we just concluded our nationally qualified test, we had 600,000 plus people appeared in the test. We have so far already issued 46,000 offers."
He further said, "On the question of attrition, we came from 21.3% to 20.1%, it seems slow because of the rate is calculated. If we look at quarterly analyzed attrition, our attrition rate has come down to 4.2% from last quarter to this quarter. For the future, i expect it to come to pre-pandemic levels in the second half of this year.
TCS records all-time high number of large deals in Q4FY23. The company's order book comes at $10 billion. For the full year FY23, the company's order book comes at $34.1 billion.
Among client metrics, 60 clients are in the band of above $100 million up 2% YoY, while 133 in the $50 million band rises by 13% YoY. 291 clients were in the bank of over $20 million up by 23% YoY. Further, 461 clients were in $10 million band up 22% YoY, and 1241 clients in $1 million band up 59% YoY.
During March 2023 quarter, the company's net margins stood at 19.3%, expanding from 18.6% of the preceding quarter. While operating margins also came in at 24.5% in the quarter under review, flat compared to the December 2022 quarter.
Rajesh Gopinathan, Chief Executive Officer and Managing Director, said: “It is very satisfying to look back at our strong growth in FY 2023, on top of the mid-teen growth in the prior year. The strength of our order book demonstrates the resilience of demand for our services and gives us visibility for growth in the medium term. Krithi and I are working closely to ensure that the leadership transition over the next few months is smooth and seamless to all our stakeholders, and that TCS is well positioned to capture the opportunities ahead."
In Q4FY23, the company posted a consolidated revenue of ₹59,162 crore, rising by 16.94% from ₹50,591 crore in Q4 of the previous fiscal. The company posted revenue of ₹58,229 crore in December 2022 quarter.
In constant currency, the review growth stood at 10.7% YoY.
TCS posted a consolidated net profit of ₹11,392 crore, up by 14.76% in Q4FY23 compared to a profit of ₹9,926 crore in Q4 of the previous fiscal. This profit is attributable to shareholders of the company.
The company posted a consolidated PAT of ₹10,846 crore in December 2022 quarter.
In Q3FY23, TCS reduced its workforce by 2,197 employees to 613,974 --- compared to the headcount of 616,171 employees in the September 2022 quarter.
Also, the company's IT services attrition rate dipped to 21.3% on an LTM basis in Q3FY23 which is lower than 21.5% in Q2FY23. TCS that time said, the attrition rate "is expected to fall further in the coming quarters."
For Q4, experts believe that IT firms hiring is likely to be muted.
Read here: IT firms likely to record muted hiring in Q4. What to expect from TCS, Infosys results?
The Nifty IT index jumped by 304.55 points or 1.06% to end at 28,980.30. Infosys was the top gainer soaring by 1.6% followed by Coforge up 1.5%, LTI Mindtree and Mphasis up 1.2% each. Persistent Systems and TCS gained 1% each. HCL Tech, Wipro and LTTS surged between 0.5% to 0.8% as well.
Investors traded on a positive note ahead of TCS earnings.
Although all eyes await TCS Q4 earnings, investors were strongly bullish on Infosys stock on Wednesday. Infosys is the next in line to announce its Q4 earnings on April 13.
Infosys share price closed at ₹1,429 apiece on NSE, up by 1.63%. The stock is near the day's high of ₹1,431.50 apiece.
Read here: Infosys Q4 preview: Revenue growth likely to be muted, result on 13 April. Key factors here
Also Read: Infosys shares rise over 1% ahead of Q4 results. Here's what analysts say
TCS share price closed up by at least 1% to ₹3,245.50 apiece on NSE, as investors await Q4 earnings due later in the day.
The stock traded in the range of an intraday high and low of ₹3,260.95 apiece and ₹3,199 apiece respectively.
On the previous day, TCS shares stood at ₹3,213.80 apiece.
Kotak Institutional Equities believes that TCS will likely lead Tier 1 IT on growth in 4QFY23. It forecast growth of 1.1% qoq and 11.2% yoy revenue growth in c/c. Growth will likely be led by spending on cloud and digital programs, cost take-outs, and wallet share/vendor consolidation gains. Exposure to impacted banking clients will not materially impact revenue growth in our view in the quarter.
Read here: TCS Q4 preview: Muted revenue growth likely, deal momentum may continue; result on 12 April
Apart from Q4 results, TCS will also recommend a final dividend for FY23 on Wednesday. The company has already paid a total of three interim dividends to the tune of 9100% to ₹91 per equity share for FY23.
So far in FY23, TCS has paid an interim dividend of ₹8 per share and a special dividend of ₹67 per share --- for both, the stock turned ex-dividend in January 2023. These would be the third interim dividends including special dividends.
The first interim dividend was in July 2022 at ₹8 per equity share. A similar ₹8 per share dividend was announced as the second interim in October last year.
The company will announce its March 2022 quarterly results after market hours.
On Wednesday, the TCS board will meet to approve and take on record the audited standalone financial results of the Company under Indian Accounting Standards (Ind AS) for the year ending March 31, 2023.
Also, the board will take on record the audited consolidated financial results of the Company and its subsidiaries under Ind AS for the year ending March 31, 2023.
ICICI Direct expects TCS' EBITDA at RS 15,968.6 crore up by 15.3% YoY and 2.7% QoQ. The brokerage also believes that the company will miss the target exit EBIT margin range of 25% as lower growth would be an additional headwind. Thereby, the brokerage has build in only 20 bps QoQ margin expansion ( vs. 50 bps implied margin expansion for target exit).
In Q3FY23, the company's operating margin stood at 24.5% contracting by 0.5% YoY.
ICICI Direct expects TCS to report ₹11,224.5 crore higher by 13.1% YoY and 3.5% QoQ respectively.
In Q3FY23, the company garnered a net profit of ₹10,846 crore attributable to shareholders on a consolidated basis up by 11.02% YoY and 3.98% QoQ. The net margin stood at 18.6% for the quarter. TCS' order book stood at $7.8 billion as of December 31, 2022, versus $8.1 billion in 2QFY23.
For Q4FY23, ICICI Direct expects TCS to report a revenue of ₹59,362.9 crore up by 17.3% YoY and 1.9% QoQ.
In Q3FY23, on a consolidated note, TCS posted revenue from operations came in at ₹58,229 crore increasing by 19.11% YoY and 5.28% QoQ. In terms of constant currency, the revenue growth was at 13.5% YoY driven by business in North America and the UK.
As per Kotak Institutional Equities, key factors that investors can focus on TCS' Q4 results are:
- CY2023E budget closure and pace of decision-making and ramp up of budgeted spends;
- pipeline of cost take-out and vendor consolidation decisions of clients and win-rates;
- changes to strategy, key bets and priorities of the organization under new CEO and continuity of current organizational structure that underwent a reorg under Rajesh;
- health of impacted verticals/geos especially hi-tech, retail and Europe;
- outlook of spending in BFS given recent events and exposure to impacted companies;
- how the current slowdown and potentially even recession differ from the past;
- whether attrition rate can reduce to pre-Covid levels and maintain pre-Covid level gap with peers and
- levers to increase margin back to 26-28% range.
ICICI Direct believes that TCS will miss the target exit EBIT margin range of 25% as lower growth would be an additional headwind. Thereby, the brokerage has build in only 20 bps QoQ margin expansion ( versus 50 bps implied margin expansion for target exit).
Nifty IT index surged by over 244 points or 0.9% ahead of TCS earnings. The index's current level is at 28,919.80. It has touched the day's high of 28,939.70.
All the stocks on the index are in the green.
Coforge is the top gainer soaring by 1.5% followed by Infosys and Mphasis advancing by 1.3% and 1.2% respectively.
Stocks like Persistent Systems, Tech Mahindra, Wipro, HCL Tech, and TCS are also up nearly a percent. L&T twins LTIM and LTTS picked up marginally.
The fourth quarterly results of FY23 are for the three months between January to March 2023.
Mitul Shah - Head of Research at Reliance Securities said, “The 4QFY23 earnings season begins this week with TCS due to report on Wednesday followed by Infosys on Thursday. Investors will closely watch out for management commentary on the demand environment for Indian IT services in the backdrop of the banking crisis and the slowing economic environment."
Read here: TCS Q4 results today: Key things to watch out for
