Mumbai, Apr 13: IT services major TCS on Friday reported a 9 per cent growth in net profit at Rs 12,434 crore in January-March quarter of FY24 due to strong domestic business even as the company struggled in its key markets overseas.
In the entire fiscal year, the Tata Group company’s net profit surged 9 per cent to Rs 45,908 crore, while the revenue went up to Rs 2,40,893 crore from Rs 2,25,458 crore a year ago.
The company said its overall workforce declined by over 13,000 during the last 12 months and now stands at 6,01,546.
North America, the biggest market by geography, reported a 2.3 per cent dip in revenues, while continental Europe, the third biggest, witnessed a 2 per cent decline in revenues during the latest January-March period.
However, its domestic business, which saw nearly 38 per cent growth in revenues, helped the company post a 3.5 per cent growth in revenues to Rs 61,237 crore during the quarter.
TCS chief executive and managing director K Krithivasan told reporters that uncertainties are hampering growth in North America and the largest sector of banking, financial services and insurance, but exuded confidence that things are bottoming out and growth should return.
“It is difficult to say when growth will return… but FY25 will be better than FY24,” Krithivasan said, adding that though he is not disappointed with the performance, an additional growth of up to 1 percentage point would have made him happier.
Company’s chief operating officer N G Subramanian, who is retiring soon, explained that discretionary spends have been impacted at client ends, hitting revenues, while the spending on non-discretionary part continues.
Uncertainties on the macroeconomic front are resulting in delays in ramp-up of already signed deals, which impacts the revenue accretion for a quarter, the company management said.
The regional and emerging markets will continue to outperform the major ones in the new fiscal as well, even though they currently contribute a smaller portion to the overall pie, Krithivasan said.
On the domestic business, where it was expected to do better courtesy the ramping up of the Rs 15,000-crore deal with state-run BSNL, the company reported a 38 per cent jump in revenues, which helped take up India’s contribution to 6.7 per cent of the overall revenue pie from 5 per cent in the year-ago period.
Subramaniam said new orders reached USD 13.2 billion, the highest ever for any quarter in the company’s history, and stressed that a good part of the deals are of lower value and short-term in nature, which the company prefers given the current environment.
Without giving any specific commentary on his outlook on the deal pipeline, the CEO said all kinds of deals are available in the market and the company is chasing all of them.
The operating profit margin widened by 1.50 per cent to 26 per cent and came into the aspirational band of 26-28 per cent in many quarters, chief financial officer Samir Seksaria said.
He attributed the improvement to bottoming out of the subcontractor costs, better utilization and disciplined execution, and added that the company will focus on other factors including better deal pricing to improve margins.
Chief human resources officer Milind Lakkad said the company will hire 40,000 freshers in the new fiscal and will be making a pay hike of 4.5-7 per cent for all its employees.
The attrition numbers has narrowed to 12.5 per cent and Lakkad said there is a scope for a further improvement of up to 0.30 per cent.
About the company’s deal with BSNL, Subramaniam said it will take up to a year for the roll-out of the entire contracted value for the state-owned telecom firm, where it is helping the telco build a modern 4G network. He also admitted to the timelines being a bit delayed than what was initially envisaged.
India is a market with very high potential and the company focuses on executing one big ‘nation-building’ project per year, the COO said, underlining some challenges in the market.
The challenges include the payment terms and other aspects, he said, adding that the company takes a “calibrated” call on which deals to sign up for.
On the generative AI front, Subramaniam said it is getting embedded into virtually every contract that it is signing, while Krithivasan pegged the overall pipeline of exclusive Gen AI deals at USD 900 million.
The company is engaged in 200 projects of various sizes and use-cases on the new age technology, he said.
When asked about the decline in workforce, the company management said past investments in people, where it had hired a large bench, are leading to the present situation. There is no direct correlation between the revenue growth and employee increase either, it maintained.
The overall tech spends are not contracting and are expected to go up in areas such as cybersecurity, AI, supply chain and risk management, Subramaniam said.
“TCS has displayed modest growth in a muted macro environment and has yet again set the operational performance standard for the rest of the large-cap pack to follow,” an analyst at brokerage Stoxbox said.
TCS scrip closed 0.45 per cent higher at Rs 4,000.30 apiece on the BSE on Friday as against a 1.06 per cent correction in the benchmark index. (PTI)
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