Tata Consultancy Services, the country's largest IT services provider, came out with better than expected quarterly earnings scorecard for the quarter ended September, with profitability crossing the Rs 10,000-crore mark, backed by consistent demand in services.
The IT sector bucked trend in the falling markets, ahead of TCS earnings, with Nifty IT index rising 1 percent. The stock itself gained 1.75 percent.
Here are 10 key highlights from TCS' earnings:
1) Profit
The IT services company clocked consolidated bottomline at Rs 10,431 crore for the September FY23 quarter, a 10 percent growth over previous quarter (up 8.4 percent YoY), with profitable growth across verticals. According the average of estimates of analysts polled by CNBC-TV18, the profit was estimated at Rs 10,248 crore for the quarter.
"Demand for our services continues to be very strong. We registered strong, profitable growth across all our industry verticals and in all our major markets," said Rajesh Gopinathan, Chief Executive Officer and Managing Director.
2) Top Line
The consolidated revenue in rupee terms grew by 4.8 percent sequentially (up 18 percent YoY) to Rs 55,309 crore by the company, higher than CNBC-TV18 poll estimates that pegged it at Rs 54,905 crore for the said quarter, driven by strong execution.
"This was another quarter of excellent execution that saw us delivering several transformational projects like the largest migration of 2.3 million policies to TCS Insurance platform in one go in the UK, or the trading platform at the Gift City," said N Ganapathy Subramaniam, Chief Operating Officer and Executive Director.
Consolidated revenue in dollar terms increased by 1.4 percent quarter-on-quarter to $6,877 million and in constant currency, the growth was 4 percent for the September FY23 quarter (against 3.5 percent in Q1FY23), better than CNBC-TV18 poll estimates of 1.3 percent and 3.4 percent, respectively.
Also read - TCS Q2 result: Net profit jumps 8% YoY to Rs 10,465 crore
On a year-on-year basis, the revenue growth in constant currency was 15.4 percent.
3) Orderbook
The orderbook remained quite strong for yet another quarter at $8.1 billion for Q2FY23, though slightly down compared to $8.2 billion in previous quarter.
"Our order book is holding up well, with a healthy mix of growth and transformation initiatives, cloud migration and outsourcing engagements," Rajesh Gopinathan said.
As clients prepare for a more challenging environment ahead, technologies like cloud that have been embraced now have to be fully leveraged to realize the promised value, he added.
4) Growth Across Verticals
The Tata Group firm said the growth was broad-based across verticals, led by Retail & PCG that grew by 22.9 percent YoY in constant currency terms, and communications & media with 18.7 percent growth.
Technology & services vertical registered a 15.9 percent growth, and manufacturing as well as life sciences & healthcare verticals grew 14.5 percent, while BFSI reported 13.1 percent YoY growth in constant currency.
5) Regionwise Performance
Major markets like North America (up 17.6 percent YoY in constant currency), UK (up 14.8 percent) & Europe (up 14.1 percent) showed strong growth.
In emerging markets, India clocked 16.7 percent YoY growth, Latin America 19 percnet, Middle East & Africa 8.2 percent and Asia Pacific showed 7 percent increase compared to year-ago period.
6) Services
TCS said there was strong, broad-based growth for all services in Q2, led by cloud, enterprise application services, and cyber security.
The demand for cloud modernization services continued across all hyperscaler cloud services to drive scalability, reliability, and business transformations in all industry verticals, while the cloud ERP, customer experience, connected services and managed security are the themes that drove the growth in Q2, it added.
The company believes the demand for cybersecurity services continued to be robust as clients focus on protecting critical infrastructure; there is greater adoption of TCS Cyber Defence Suite for operations, monitoring, GRC and reporting.
There were multiple large deal wins for digital transformation of operations in data center and network, digital workspace, and customer experience. Areas which saw most growth in Q2 include digital financial & accounting, agile supply chain and human capital management services, TCS said.
7) Operating Performance
The operating performance for the September FY23 quarter, too, was better than analysts' estimates. Consolidated earnings before and tax (EBIT) in Q2FY23 grew by 9 percent sequentially to Rs 13,279 crore and margin expanded by 90 bps to 24 percent compared to previous quarter.
The CNBC-TV18 poll estimates for EBIT and margin were at Rs 13,079 crore and 23.8 percent for the quarter.
"We are steadily making our way towards achieving the operating margin priority for the year, aided by leverage from good growth, the flattening of the workforce pyramid, steadily improving productivity and currency support," said Samir Seksaria, Chief Financial Officer.
Very importantly, the headwinds from the supply-side challenges are abating, so that set up well for the seasonally weak second half of the year, he said.
8) Workforce
TCS reported net addition of 9,840 employees during the quarter, taking the workforce to 6.16 lakh as on September 2022, with women making up 35.7 percent of the base.
Also read - TCS adds 20,000 freshers in Q2FY23, says all job offers honoured
In Q2, "TCSers clocked 11.7 million learning hours, resulting in the acquisition of 1.5 million competencies," the company said in its BSE filing.
9) Attrition
IT services attrition was 21.5 percent on the last twelve months' basis, which came in higher than 19.7 percent recorded in June FY23 quarter.
With normalizing wage expectations and talent supply catching up across the industry, the company expects attrition to start to taper down in second half of FY23.
"We believe the quarterly annualized attrition has peaked in Q2 and should see it taper down from this point, while compensation expectations of experienced professionals moderate," Milind Lakkad, Chief HR Officer said.
TCS' investments in capacity building and organic talent development have allowed it to substantially grow the business ahead of headcount addition this quarter, he added.
10) Dividend
The company said the board of directors on Monday declared a second interim dividend of Rs 8 per share.
The second interim dividend will be paid on November 7 to the equity shareholders, while the record date has been fixed as October 18 for determining the eligibility of shareholders for paying the dividend.
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