Result Analysis: Tata Consultancy Services Ltd.(CMP: Rs.3260.20) Result Update: Q1FY24

Tata Consultancy Services is the largest IT Company in India and the global leader in IT services, consulting and business solutions with an extensive global network. The company offers a consulting-led, cognitive powered, integrated portfolio of business, technology and engineering services and solutions. It provides services to industries such as BFSI, manufacturing, telecommunications, retail and transportation. The company serves to the world’s biggest conglomerates like Google, Amazon, Apple, IBM, Bosch, Adobe etc.

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    Stock Details
    Market Cap. (Cr.) 1192924
    Equity (Cr.) 365.91
    Face Value 1
    52 Wk. high/low 3575 / 2926
    BSE Code 532540
    NSE Code TCS 
    Book Value (Rs) 247.01
    Sector IT – Software


    Key Ratios
    Debt-equity: 0.09
    ROCE (%): 53.97
    ROE (%): 47.26
    TTM EPS: 115.13
    P/BV: 13.20
    TTM P/E: 28.32

    Result Highlights:

    • TCS reported marginal increase of 0.4% in the revenues on sequential basis to Rs.59,381 cr. while Net profits decrease of 2.8% QoQ to Rs.11,120 cr. in the first quarter of FY24.
    • The earnings were in-lined with the broader street expectations; soft earnings growth was mainly due to the slowdown in discretionary spending projects mainly in North America.
    • EBIT of the company declined by 5.1% QoQ due to the wage hike; this resulted in an EBIT margin of 23.2%, which is down from 24.5% in the previous quarter.
    • Among segments, Manufacturing and Retail showed better performance with growth of 1.5% and 1.1% QoQ. Life Sciences and healthcare showed muted growth of 0.9% QoQ while BFSI i.e. the major contributor in the revenue showed subdued growth of 0.2% QoQ.
    • On the yearly basis, TCS’s growth in the U.K. was significantly higher than in its traditional strongholds of North America and Europe. The U.K. saw a growth rate of 16.1%, while North America and Europe saw growth rates of 4.6% and 3.4%, respectively. Even emerging markets, such as the Middle East and Africa, India, and Latin America, saw double-digit growth rates of 15.2%, 14%, and 13.5%, respectively.
    • Order book of TCS is at record high of $10.2 billion in Q1, up from $10 billion in Q4 FY23.
    • Attrition rate dropped to 17.8% vs 20.1% of previous quarter, co. added 523 employees during Q1 taking total headcount to 6,15,318.
    • Board of the company announced a dividend of Rs.9/share; record date for dividend is 20/07/2023 and payment date is 07/08/2023.


    Financial Performance:

    TCS-Financial PerformancE

    Shareholding Pattern:

    Particulars (In %) Q4FY23 Q1FY23
    Promoters’ Group 72.3 72.3
    FIIs 12.93 13.7
    DIIs 9.64 8.36
    Public 4.87 5.28
    Others 0.27 0.36

    Management Commentary:

    Commenting on June quarter results, K Krithivasan, CEO and MD 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 maximize our participation in these opportunities.”


    TCS reported muted earnings in Q1FY24 majorly due to the broad based demand concerns in America and BFSI segment. Although the macroeconomic environment is unpredictable, we think TCS will continue to win transactions involving cost optimization, vendor consolidation, and integrated operations. Given the clientele and recent sizable deal wins, we anticipate TCS to be a major gainer. Additionally, a robust deal pipeline of US$10.2 billion and the consumer move to larger banks (TCS’s clients) will fuel medium-term growth. Long-term growth will be fueled by this along with the company’s emphasis on technologies like 5G, IoT, generative AI, virtual reality/metaverse, and digital twin.


    Particulars (In Rs. Cr.) Q1FY24 Q4FY23 Q1FY23 QoQ% YoY%
    Revenue from Operations 59,381 59,162 52,758 0.4% 12.6%
    Other Income 1397 1175 789 18.9% 77.1%
    Total Income 60,778 60,337 53,547 0.7% 13.5%
    Employee Benefit Expenses 35,148 33,687 30,327 4.3% 15.9%
    Employee benefit Expenses as % of Sales 59.2% 56.9% 57.5% 230 bps 170 bps
    Equipment & Software licences cost 506 620 217 -18.4% 133.2%
    Depreciation & Amortisation Expense 1,243 1,286 1,230 -3.3% 1.1%
    Other Expense 8,729 9,081 8,799 -3.9% -0.8%
    EBIT 13,755 14,488 12,185 -5.1% 12.9%
    EBIT Margin (%) 23.2% 24.5% 23.1% -130 bps 10 bps
    Profit After Tax (PAT) 11,120 11,436 9,519 -2.8% 16.8%
    PATM (%) 18.7% 19.3% 18.0% -60 bps 70 bps
    EPS (in Rs.) 30.26 31.14 25.9 -2.8% 16.8%
    Segment Revenue % Q1FY24 Q4FY23 Q1FY23 QoQ% YoY% Revenue %
    BFSI 22662 22628 20244 0.2% 11.9% 38.2%
    Manufacturing 5636 5550 5088 1.5% 10.8% 9.5%
    Retail and – Consumer Business 9876 9773 8832 1.1% 11.8% 16.6%
    Communication, Media and Technology 9596 9696 8848 -1.0% 8.5% 16.2%
    Life Sciences and Healthcare 6636 6585 5667 0.8% 17.1% 11.2%
    Others 4975 4930 4079 0.9% 22.0% 8.4%
    Geography Revenue % Q1FY24 Q4FY23 Q1FY23 QoQ YoY
    North America 52.0 52.4 53.2 -0.4 bps -1.2 bps
    Latin America 2.0 1.8 1.8 0.2 bps 0.2 bps
    UK 16.4 15.7 14.9 0.7 bps 1.5 bps
    Continental Europe 15 15.1 15 -0.2 bps -0.3 bps
    Asia Pacific 7.8 8.0 8.3 -0.2 bps -0.5 bps
    India 4.9 5.0 4.8 -0.1 bps 0.1 bps
    MEA 2.0 2.0 1.8 0.00 bps 0.2 bps
    Source: Company website, EWL Research

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