TCS Q4 Results: Revenue Rises 1.6%, Profit Up 5% Amid Margin Miss

Tata Consultancy Services Ltd.’s revenue and profit met estimates in the final quarter of fiscal 2023 amid a banking crisis in its largest market. However, its margins came short.

The after effects of a banking crisis in the U.S. reflected in the company’s growth in its largest vertical. TCS’ BFSI revenue increased 9.1% to Rs 22,628 crore as compared with 11.1% in the seasonally weak December quarter.

The company’s growth in the January-March period was not led by its biggest market, but by a small cluster of islands across the Atlantic.

TCS’ U.K. business grew 17%, followed by North America (9.6%) and Continental Europe (8.4%), according to the earnings statement. Among emerging markets, Latin America grew 15.1%, India 13.4%, the Middle East and Africa 11.3%, and the Asia-Pacific 7.5%.

“We don't see the banking crisis exacerbating going ahead, as the (U.S.) government has stepped in. It doesn’t in any way compare with the 2008 recession,” TCS’ CEO designate Krithi Krithivasan said. “It’s difficult to say whether there’s more pain left in the BFSI space, but there’s no structural pain. Sentiment and macros, that’s what we are more focused on.”

TCS has reported a strong order book of $10 billion in the January-March period, on the back of the highest number of large deals signed in a quarter. Still, that’s 11.5% lower than the total contract value of $11.3 billion in the year-ago period. For the full year, TCV stood at $34.1 billion—marginally lower than $34.6 billion in FY22.

North America contributed about $5 billion of the $10-billion deals struck in Q4 FY23, while the BFSI segment brought in new business of $3.1 billion, TCS' COO N Ganapathy Subramaniam said. “That said, dealmaking has been broad-based—across geographies and verticals.”

According to Subramaniam, ChatGPT has been at the front and centre of his conversations with clients over the past three months. 

“In my interactions with clients over the past quarter, conversations start and stop with ChatGPT,” he said. “In a way, that shows that innovation is surpassing productivity. That kind of theme is what is panning out in all these deal wins we have.”

There are no big budget cuts as such but there is an overall sense of spending wisely, he said.

TCS’ attrition rate, on a trailing 12-month basis, eased to 20.1% in the March quarter as the company added a mere 821 employees during the three-month period. For the full year, the Mumbai-based IT services company clocked net additions of 22,600 employees. As on March 31, the company’s total headcount stood at 6,14,795.

According to Milind Lakkad, chief HR officer at TCS, the company has already rolled out job offers to 46,000 freshers for FY24, as against 44,000 in FY23. Over 6 lakh graduates appeared for TCS’ national qualifier test. 

“We are honouring all job offers, and have added 22,600 employees on a net basis in FY23,” he said in a statement. “During the year, we onboarded 44,000 freshers and our highest number of experienced professionals.”

However, he acknowledged that there has been a delay in onboarding.

“There were some delays—a month or two—but it will happen. We are honouring all offers, with no reduction in salaries whatsoever,” Lakkad said, during the post-earnings press meet. “We are committed to what we offer.”

High performing employees can expect a 12-15% salary hike, while the rest can expect 5-8% hike in the current appraisal cycle, he said.

Shares of TCS rose 0.87% to Rs 3,242.10 apiece on the BSE, even as the benchmark Sensex ended the day 0.39% higher at 60,392.77 points. The quarterly results were declared after market hours.