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.

Result Analysis: Tata Consultancy Services Ltd.(CMP: Rs.3610) Result Update: Q2FY24


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    Stock Details
    Market Cap. (Cr.) 1320990.75
    Equity (Cr.) 365.91
    Face Value 1
    52 Wk. high/low 3680 / 3053
    BSE Code 532540
    NSE Code TCS 
    Book Value (Rs) 247.01
    Sector IT – Software
    Key Ratios
    Debt-equity: 0.09
    ROCE (%): 58.04
    ROE (%): 47.26
    TTM EPS: 119.55
    P/BV: 14.62
    TTM P/E: 30.20



    Result Highlights:

    • TCS reported marginal increase of 0.5% in the revenue on sequential basis to Rs.59,692 cr. while Net profits increase of 2.4% QoQ to Rs.11,342 cr. in the second quarter of FY24. The prolonged slowdown in discretionary spending and clients reprioritizing cost-cutting programs were the main causes of the muted revenue growth.

    • EBIT increased by 5.3% QoQ and EBIT Margin improved by 110 bps to 24.3% due to the reduction of number of new hiring and decrease in software license cost.

    • Among segments, BFSI i.e. the major contributor in the revenue showed subdued growth of 0.8% QoQ. Retail, Communication and Life Sciences & Healthcare segments also declined by 1%, 0.3% and 0.2% respectively on QoQ basis. While the demand was seen in the manufacturing segment with the growth of 2.7% QoQ in the quarter.

    • TCS’s growth in the U.K. was higher than in its traditional strongholds of North America and Europe. The U.K. saw a growth rate of 10.7% YoY on CC basis, while North America and Europe continued slower growth rate. Middle East and Africa region is growing strong with 15.9% YoY.

    • The deal momentum remained strong as TCS earned the second-highest deal total contract value ever of $11.2 billion in Q2, with a book-to-bill ratio of 1.6 times.

    • Attrition rate dropped to 14.9% vs 17.8% of previous quarter, company lost 6,333 associates during the quarter, and had a closing headcount of 608,985 associates.

    • Board of the company announced a dividend of Rs.9/share; record date for dividend is 19/10/2023 and payment date is 07/11/2023.

    • Company also proposed a tender offer to buyback shares worth of Rs.17,000 crore at share price of Rs.4,150 which is ~15% premium of the CMP.

    Management Commentary:

    Commenting on September quarter results, K Krithivasan, CEO and MD said, “Our clients continue to entrust us with critical new technology initiatives, and large programs to digitally transform their IT and business operating models. Strong deal momentum delivered us a very large order book in Q2 – our second highest TCV ever in a quarter, and good pipeline. The resilience of demand for our services, our clients’ willingness to commit to long tenure programs and their continued appetite for experimentation with Gen AI and other new technologies give us confidence in our longer-term growth prospects.”


    TCS reported mixed earnings in Q2FY24 majorly due to the prevailing slowdown across key geographies.i.e.US/Europe. Due to the challenging macro environment clients remain cautious. However, strong order book and exposure to long duration orders suggests better earnings going forward. Company’s margin is going to improve further in the coming quarters owing to company’s focus on the improvement in the utilization and productivity along with muted hiring. TCS has maintained its market leadership position and demonstrated best-in-class execution, which have allowed it to maintain its industry-leading margin and exhibit exceptional return ratios and we remain positive on the stock with the longer term perspective.


    Particulars (In Rs. Cr.) Q2FY24 Q1FY24 Q2FY23 QoQ% YoY% H2FY24 H2FY23 YoY%
    Revenue from Operations 59,692 59,381 55,309 0.5% 7.9% 1,19,073 1,08,067 10.2%
    Other Income 1006 1397 965 -28.0% 4.2% 2,403 1,754 37.0%
    Total Income 60,698 60,778 56,274 -0.1% 7.9% 1,21,476 1,09,821 10.6%
    Employee Benefit Expenses 35,123 35,148 31,041 -0.1% 13.2% 70,271 61,368 14.5%
    Employee benefit Expenses as % of Sales 58.8% 59.2% 56.1% -0.4% 2.7% 59.0% 56.7% 2.2%
    Equipment & Software licences cost 462 506 401 -8.7% 15.2% 968 618 56.6%
    Depreciation & Amortisation Expense 1,263 1,243 1,237 1.6% 2.1% 2,506 2,467 1.6%
    Other Expense 8,361 8,729 9,351 -4.2% -10.6% 17,090 18,149 -5.8%
    EBIT 14,483 13,755 13,279 5.3% 9.1% 28,238 25,465 10.9%
    EBIT Margin (%) 24.3% 23.2% 24.0% 110 bps 30 bps 23.7% 23.6% 20 bps
    Profit After Tax (PAT) 11,342 11,074 10,431 2.4% 8.7% 22,416 19,909 12.6%
    PAT Margin (%) 19.0% 18.6% 18.9% 40 bps 10 bps 18.83% 18.42% 40 bps
    EPS (in Rs.) 31.00 30.26 28.51 2.4% 8.7% 61.26 54.41 12.6%
    Segment Revenue (In Rs. Cr.) Q2FY24 Q1FY24 Q2FY23 QoQ% YoY% Revenue %
    BFSI 22,840 22,662 21,110 0.8% 8.2% 38.3%
    Manufacturing 5,787 5,636 5,170 2.7% 11.9% 9.7%
    Retail and – Consumer Business 9,773 9,876 9,240 -1.0% 5.8% 16.4%
    Communication, Media and Technology 9,572 9,596 9,356 -0.3% 2.3% 16.0%
    Life Sciences and Healthcare 6,625 6,636 5,999 -0.2% 10.4% 11.1%
    Others 5,095 4,975 4,434 2.4% 14.9% 8.5%
    Geography Revenue % Q2FY24 Q1FY24 Q2FY23 QoQ YoY
    North America 51.7 52.0 54.3 -0.3 bps -2.6 bps
    Latin America 2.0 2.0 1.7 0.0 bps 0.3 bps
    UK 16.5 16.4 14.5 0.1 bps 2.0 bps
    Continental Europe 14.9 14.9 14.5 0.0 bps 0.4 bps
    Asia Pacific 7.8 7.8 8.0 0.0 bps -0.2 bps
    India 4.9 4.9 5.1 0.0 bps -0.2 bps
    MEA 2.2 2.0 1.9 0.2 bps 0.3 bps

    Highlights from Management Commentary:

    • The macro environment remains weak similar to 1QFY24, leading to a broad based slowdown. There is heightened caution among clients in North America and continental Europe, while momentum in UK remains strong.

    • Retail continues to face difficulties since several sub-verticals are slowing down, including essential expenditure. In the US, household savings are still low.

    • The deal pipeline remains strong despite strong deal wins. TCS expects deal wins to remain strong. During the quarter, TCS won two mega deals of USD1b each from BSNL and JLR. TCS is system integrator for the BSNL deal. Though the current deal amounts to USD1b, post-implementation maintenance work could lead to incremental business. A significant portion of this deal is expected to get billed over the next 12-18 months.

    • The management has suggested that improvements in utilization and productivity, along with the rationalization of discretionary and sub-contractor expenses, remain margin levers for 2HFY24.

    • The reduction in headcount in 2QFY24 was on account of the recalibration of gross additions, as TCS realizes benefits from investments in fresher hiring over the last few quarters. TCS expects hiring to remain muted in the coming quarters.

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