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Tata Consultancy Services (TCS) Q1FY23 results beat street estimates on topline and continued to keep pace with the growth momentum it delivered in FY22.
TCS’ net profit grew 5.2 per cent year on year, and 2.5 per cent sequentially to Rs 9,478 crore in Q1FY23, but missed estimate of Rs 9,850 crore, according to Bloomberg data. Revenue for the quarter came in at Rs 52,758 crore, up 16.2 per cent YoY and 4.28 per cent sequentially.
While the company’s Q1 revenue was ahead of Bloomberg estimates of Rs 52,486 crore, margins for the quarter came in at 23.1 per cent, down 2.4 per cent year on year.
From an outlook perspective the company signed a total contract value worth $8.2 billion. The order book compared to Q4 is lower, but Q4 had two large deals. The $8.2 billion is the range that the company has been signing deals consistently.
Rajesh Gopinathan, Chief Executive Officer and Managing Director, said: “We are starting the new fiscal year on a strong note, with all-round growth and strong deal wins across all our segments. Pipeline velocity and deal closures continue to be strong, but we remain vigilant given the macro-level uncertainties. Our new organization structure has settled in nicely, getting us closer to our clients and making us nimbler in a dynamic environment. Looking ahead, we remain confident in the resilience of technology spending and the secular tailwinds driving our growth.”
However, attrition continued to peak, coming in at 19.7 per cent for the quarter, and much higher than the 17.4 per cent in Q4FY22. The company had net headcount addition of 14,136 during the quarter, taking its total headcount to 606,331.
Higher attrition had its impact on the margins. Samir Seksaria, Chief Financial Officer, said: “It has been a challenging quarter from a cost management perspective. Our Q1 operating margin of 23.1 per cent reflects the impact of our annual salary increase, the elevated cost of managing the talent churn and gradually normalising travel expenses. However, our longer-term cost structures and relative competitiveness remain unchanged, and position us well to continue on our profitable growth trajectory.”
N Ganapathy Subramaniam, Chief Operating Officer and Executive Director, said: “The investments we made on people, upskilling efforts and select lateral hiring et al helped manage the talent turnover with minimum impact on our operations. During the quarter, we have resumed in-person meetings, and hosted several clients at our facilities. We are bringing in more of our associates back to our development centres, and it is steadily increasing at all levels. On the sustainability front, we have signed our commitment to SBTi version 5 standards during the quarter and are making steady progress towards our net zero journey with tremendous alignment to this initiative across our associates.”
Milind Lakkad, Chief HR Officer, said: “Our investment in strategic talent development initiatives and the linking of learning to career development have energised our workforce. Following our annual compensation review, employees received salary increases of 5-8 per cent, with top performers getting even bigger hikes. Our empowering, performance-driven work culture is helping us attract local talent across all our key markets. Continued hiring momentum resulted in a milestone quarter, with the employee strength crossing the 600,000 mark.”
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