TCS Q4 results: Profit rises 9% to Rs 12,434 crore, revenue up 3.5%

Reporting one of its highest deal wins in the midst of macro challenges, Tata Consultancy Services (TCS), India’s largest information-technology (IT) services player, on Friday kicked off the IT-results season for the fourth quarter of FY24. TCS reported a net profit of Rs 12,434 crore, up 9.1 per cent year-on-year (Y-o-Y).

TCS signed one of its highest total contract values (TCV) — $13.2 billion — in the fourth quarter of FY24.

 

For FY24, TCS had an order book of $42.7 billion, the highest ever.

 

TCS’s Q4 performance missed Bloomberg revenue estimates but beat those marginally on profit. Bloomberg estimated revenue to be Rs 61,451 crore and profit after tax at Rs 12,034 crore. 

 

On the demand environment, K Krithivasan, chief executive officer and managing director, said visibility had improved over a quarter back. “FY25 will be better than FY24. I think we have bottomed out and from here on we shall see growth, especially with a healthy pipeline,” he said during the media briefing after the results.

Krithivasan said that since the launch of AI.Cloud business unit TCS had seen an increased traction in the marketplace. “We have won more than 200 engagements in artificial intelligence (AI) so far this year. The number of engagements going into production is also increasing,” he said. 

He further added: “Our AI and generative AI pipeline has doubled in the quarter to $900 million.”

For the full year, TCS reported revenue of more than Rs 2.4 trillion, up 6.8 per cent Y-o-Y. Net profits for the financial year were at Rs 46,585 crore, up 10.5 per cent Y-o-Y.

Revenue touched $29 billion at the end of FY24.

The growth driver for the fourth quarter for TCS, as in the last quarter, was the emerging markets led by India and Latin America, and the UK. The US continued to be subdued.

For Q4FY24, North America was down 2.3 per cent and Continental Europe 2 per cent. The UK grew 6.2 per cent, and India a massive 37.9 per cent Y-o-Y.

In verticals, banking, financial services, and insurance, the largest for the company, continued to be soft. It was down 3.2 per cent Y-o-Y. So were consumer business, technology and services, and communications and media.

Sanjeev Hota, head of research, Sharekhan by BNP Paribas, said: “TCS reported modest revenue growth, missing our estimates. However, the company posted a strong margin expansion, beating our estimates owing to strong execution and operational efficiencies … TCS is well positioned to grab cost optimisation and transformational opportunities as sector headwinds recede, and witness a strong pickup in growth momentum, given the strong order book, strong domain capabilities, and disciplined execution.”

N Ganapathy Subramaniam, chief operating officer and executive director, said the deal sizes had come down.

Samir Seksaria, chief financial officer, said: “In a challenging environment, we persisted with our long-term investment in workforce reskilling, research, and innovation. We will continue to drive efficiencies and competitiveness.”

“The deals we signed are broad-based and came from across verticals and geographies. Many of them are short-term and of lower value. Deals that need to ramp up within a year are a big chunk of these TCVs,” he added.

Despite tepid growth, TCS managed to report margins of 26 per cent, a Y-o-Y expansion of 150 basis points.

Prashanth Tapse, senior vice-president, (research), Mehta Equities, said: “The Q4 results exceeded market expectations, with a focus on strong order inflow. Operating profit growth slightly surpassed forecasts, but revenue growth remained flat compared to the previous quarter. Despite concerns about a challenging environment, TCS outperformed IT peers.”

TCS, which has been the first company to start visiting engineering campuses for hiring freshers, said it intended to finish taking on board freshers hired in FY23 by the end of Q1 FY25.

Milind Lakkad, chief human relations officer, said the firm had given an average increment between 4.5 per cent and 7 per cent. 

First Published: Apr 12 2024 | 5:19 PM IST