TCS Reports 16.8% Rise in Q1 Net Profit

• ByStartupStory     |    July 13, 2023

Tata Consultancy Services (TCS), India’s leading IT services exporter, announced a 16.8% increase in net profit for the first quarter of the current fiscal year, signaling a challenging demand environment. The company recorded a net profit of Rs 11,074 crore, compared to Rs 9,478 crore in the same period last year. However, there was a marginal decline in net profit compared to the preceding quarter (January-March) of this year, which stood at Rs 11,392 crore. The revenue for Q1 FY24 reached Rs 59,381 crore, reflecting a 12.6% year-on-year rise but showing flattish growth compared to the previous three months.

The performance of TCS in Q1 FY24 aligned with market expectations, considering the global macroeconomic conditions. TCS CEO K Krithivasan acknowledged the near-term softness in demand, attributing it to the pause or delay of projects with low returns on investment (RoI) and non-critical projects. However, the CEO expressed confidence in the company’s long-term prospects, emphasizing that customers continue to invest in technology. TCS highlighted its robust order book, which has a total contract value (TCV) of $10.2 billion. Nevertheless, macroeconomic challenges in key markets like North America and Europe impacted the company’s overall performance. This was evident in the decline of operating profit margins to 23.2% from the sequential previous quarter’s 24.5%, primarily due to annual wage hikes.

TCS provided an average wage hike of 6% to its employees, with high performers receiving 12-15% in Q1 FY24. However, the slow demand environment resulted in reduced hiring, as the company onboarded only 523 new employees in the first quarter. TCS’s total employee strength currently stands at 6,15,318. The company assured that all employment offers would be honored, though there might be some delays in onboarding due to the sluggish business environment. Additionally, TCS deferred the hiring of certain lateral employees, according to media reports. The Indian IT industry continues to face significant market challenges, making a return to double-digit growth rates in US dollar terms challenging. TCS’s revenue growth in US dollars was 6.6% at the end of the first quarter, compared to 10.2% a year ago.

Commenting on the company’s performance, Sanjeev Hota, Head of Research at Sharekhan by BNP Paribas, stated, “The order book continues to remain healthy. However, the continued weakness in the BFS (Banking and Financial Services), technology, and communication verticals is likely to impact client sentiments.”

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