Result Analysis – Tata Consultancy Services Ltd.

Shareholding Pattern:

Financial Performance:

Results:

Conference call Highlights:

• All verticals performed well with regional markets up 7.3% QoQ, manufacturing is doing better than expected.

• Performance in revenue and profits can be seen through strong customer portfolio, number of customers who contribute US$ 100M+ rose by 1 to 59 customers YoY basis.

• Total order book remains in the range of 7-9bn as provided but is sequentially down. US deal pipelines remain strong and positive but UK and Europe regions are creating challenging environment because of the less IT spending.

• Realization both on a QoQ basis as well as YoY basis is improving and expecting this trend to continue.

• TCS is seeing an uptick in vendor consolidation deals as clients prefer full service offerings; seeing more consolidation in pipelined deals in areas such as BFSI, healthcare and telecom.

• Clients are focusing on cloud transformation and the company saw several cloud transformation deals in the quarter.

• Attrition rate has peaked out previously and has declined slightly in the quarter; confident of this declining trend to continue.

• Margin improved sequentially due to the ease in elevated expectation of salaries and the backfilling retention expenses.

• Steadily improving margins and expressed focus on exiting Q4 at 25% also confident in meeting medium-term double-digit growth targets.

Outlook:

TCS showed Q3FY23 result as per street expectations despite seasonally weak quarter; Overall segments of the company grew in the range of 5%-10%. While in the geographies, UK and Europe showed yearly degrowth representing the current slowdown in overall IT spending. Going forward Europe still presents challenging environment for the company for the FY24. Further quarters would give the clear picture regarding the global outlook. The softening order inflow including declining hiring trend as well as cautionary commentary on specific markets from the management points out to the moderating growth in FY24. Although overall medium to long term path for IT spending is strong and being one of the leader in the sector TCS would be the key beneficiary. Hence we remain positive for the company over a longer horizon

Source: Company website, EWL Research

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