TCS Reports Strong Q1 FY24 Results: Net Profit Rises 17%

Tata Consultancy Services (TCS) on Wednesday announced its financial results for the first quarter of FY24, surpassing market expectations. The company recorded a substantial increase in both revenue and net profit, demonstrating its resilience and ability to capitalise on market opportunities.

TCS witnessed a notable growth in revenue, with a year-on-year (YoY) increase of 12.6 per cent, reaching Rs 59,381 crore. The company's revenue growth was particularly notable when considering the constant currency figures, which exhibited a YoY growth rate of 7 per cent. This consistent growth reflects TCS's strong market positioning and ability to adapt to changing customer needs.

The TCS board has approved an interim dividend payout of Rs 9 a share.

The operating margin for TCS in Q1 FY24 stood at 23.2 per cent, expanding by 0.1 per cent compared to the previous year. This figure represents a notable decline of 130 basis points compared to the previous quarter. 

The net income of TCS for the quarter was Rs 11,074 crore, representing a YoY growth of 16.8 per cent. The net margin, which measures the profitability of the company, was recorded at 18.6 per cent. These figures indicate TCS's ability to maintain a healthy profit margin and effectively manage its expenses.

TCS generated strong cash flow from operations during the quarter, with net cash amounting to Rs 11,353 crore, equivalent to 102.5 per cent of its net income. This highlights the company's sound financial management and ability to generate cash from its core operations.

Furthermore, TCS added 523 employees to its workforce during the quarter, bringing the total headcount to 615,318 employees. 

Commenting on the results, TCS management stated that the performance in Q1 FY24 was driven by strong demand across key markets and industries. 

In a statement, K Krithivasan, Chief Executive Officer and Managing Director at TCS, said, “It is very satisfying to start the new fiscal year with a string of marquee deal wins. We remain confident in the longer-term demand for our services, driven by the emergence of newer technologies. We are investing early in building capabilities at scale on these new technologies, and in research and innovation, so we can maximise our participation in these opportunities.”

On the talent end, Milind Lakkad, Chief HR Officer at TCS, said, “We remain focused on developing, retaining and rewarding the best talent in the industry, and enhancing their effectiveness by bringing them back to office to foster our culture. Our Return to Office initiative is picking pace, with 53 per cent of the workforce already in office thrice a week."

He said that TCS had handed a 12-15 per cent raise for exceptional performers in its latest annual compensation review, and also commenced the promotions cycle. 

“TCSers logged 12.7 million learning hours in upskilling themselves during the quarter in market relevant skills like generative AI, cloud, data and analytics. Our attrition continues to trend down and we expect it to be back in our industry-leading, long term range in the second half of the year. While we are committed to honor all the offers we have made, our focus will be on leveraging the capacity we built last year,” Lakkad added.

Evidences of a deceleration in technology spending emerged during the quarter, as the BFSI (banking, financial services, and insurance) sector, which represents the largest vertical for TCS, experienced a modest growth rate of only 3 per cent.

Notably, sectors such as telecommunications, retail, and technology services, which have been instrumental in driving discretionary spending, exhibited notable weakness, with growth ranging from 0.5 per cent to 5.3 per cent.

However, lifesciences and healthcare, along with manufacturing, were the exceptions, witnessing substantial growth rates of 10 per cent and 9.4 per cent, respectively.

From a geographical perspective, North America, the largest market for TCS, achieved approximately 5 per cent growth, while Continental Europe recorded a growth rate of 3.4 per cent.

The UK market, on the other hand, demonstrated robust growth of 16 per cent, while emerging markets, including the Middle East, Africa, and India, achieved double-digit growth rates.

TCS highlighted that clients within the services segment continued to prioritise projects that were deemed business-critical and offered faster returns on investment (ROI). This shift in client priorities reflects a strategic focus on maximizing value and efficiency.

At the time of market closing on Wednesday, TCS shares fell 0.14 per cent to Rs 3,267.15 on BSE.

Also Read: TCS CEO Krithivasan Unveils Generative AI Developments