TCS Q1 results 2024 Highlights: Revenue beats estimates; CEO Krithivasan says implications in place for those not coming to office

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--There are implications for employees not coming to office, 70% of employees are back to office: CEO Krithivasan
--Do not have any backlog w.r.t. to delayed onboarding of freshers
--Growth of GCCs hasn’t affected us much, we are not worried at this time

CEO K Krithivasan: See IndiaAI mission in a positive way, will create more solutions to take it to our customers

--Most AI deals are short-term ones, but have started to see long-term opportunities as well

Because banks see uncertainty, they are preparing for a rainy day, says CEO

These regional geographies will become material over a period of time.

--Certain projects did not close in Q1, nothing much to read in the order book: CEO Krithivasan.

--Alert: TCS saw a sharp drop in deal wins in the first quarter of FY25 with the order book at $8.3 billion. Its total contract value (TCV) for the quarter was 18.6 percent lower from the $10.2 billion in the year-ago period and 37 percent down from the previous quarter, the company said on July 11.

--Nothing new to add in terms of market sentiments...we expect better FY25 compared to FY24: CEO Krithivasan

--Will call continued growth momentum when discretionary spend, market sentiments improve: CEO

--Will take sustained growth in BFSI, North America to reflect in numbers: CEO

Briefing the media, TCS CEO says it is still too early to call whether growth momentum will continue. "Conditions remain the same."

--CEO K Krithivasan: Growth from Latin Amercia, Middle East and Africa, India continued to have strong growth in line with our diversification strategy.

--Our AI and Gen AI pipeline has doubled to $1.5 billion: CEO

--BFSI, Tech Services, CMI continue to degrow on a YoY basis.

--TCS saw a sharp drop in deal wins in the first quarter of FY25 with the order book at $8.3 billion.

--Its total contract value (TCV) for the quarter was 18.6 percent lower from the $10.2 billion in the year-ago period and 37 percent down from the previous quarter, the company said on July 11.

--In the March quarter of FY23, the Tata group company reported a record-high order book of $13.2 billion.

Segment-wise growth in domain and markets:

Here is a snapshot of TCS Q1FY25 results:

The revenue was helped by mega deals, such as Bharat Sanchar Nigam (BSNL) and insurer Aviva.

TCS announced four mega deals or contracts sized over $500 million during the previous fiscal year even as clients clamped down on discretionary tech spending due to weak macros.

Revenue in the manufacturing segment rose 9.4 percenr year-over-year. Four out its eight verticals, including banking and financial services, fell.

TCS said the next Gen technology levers like GenAI, IoT and others bolstered growth in Q1.

--Win themes across key deals involved operating model transformation, vendor consolidation, legacy modernization, M&A, customer experience, digital workplace services, ER&D, Identity & access management and AI/GenAI initiatives: TCS

--AI.Cloud, Cyber Security and Enterprise Solutions led the growth this quarter.

--Revenue at Rs 62,613 crore, up 5.4% YoY and 4.4% YoY in Constant Currency
--Net profit at Rs 12,040 crore, up 8.7% YoY | Net Margin at 19.2%
--Operating Margin at 24.7%; an expansion of 1.5% YoY
--Net Cash from Operations at Rs 11,168 crore i.e. 92.8% of Net Income
--Workforce strength: 606,998 | Net Headcount addition of 5,452
--Diverse and inclusive workplace: Women in the workforce: 35.5% | 151 Nationalities
--LTM IT Services attrition rate at 12.1%
• Dividend per share: Rs 10.00 | Record date 20/07/2024 | Payment date 05/08/2024

TCS said that all major markets return to sequential growth; very strong double-digit growth in emerging markets, led by India (+61.8% YoY).

--Almost all verticals return to sequential growth; yoy growth led by manufacturing (+9.4%), energy, resources & utilities (+5.7%), and life sciences & healthcare (+4%)

--This is a decline both on a YoY and sequential basis. Q4 was $13.2 bn and Q1FY24 was $10.2 bn

Milind Lakkad, Chief HR Officer, said: “I am delighted to announce the successful completion of our annual increment process. Our continued focus on employee engagement and development led to industry-leading retention and strong business performance, with the net headcount addition being a matter of immense satisfaction.”

Samir Seksaria, Chief Financial Officer, said: “In spite of the usual impact of the annual wage increments in this quarter, we have delivered strong operating margin performance, validating our efforts towards operational excellence. We remain focused on making the right investments in R&I and talent, strengthening our superior return ratios and creating long term value for our shareholders."

Milind Lakkad, Chief HR Officer says net headcount addition a matter of immense satisfaction

Consolidated EBIT Margin in line with estimates at 24.3% as against Street estimates of 24.7%

K Krithivasan, Chief Executive Officer and Managing Director, said: “I am pleased to report a strong start to the new fiscal year with all-round growth across industries and markets. We are continuing to expand our client relationships, create new capabilities in emerging technologies and invest in innovation, including a new AI-focused TCS PacePort in France, IoT lab in the US and expanding our delivery centers in Latin America, Canada and Europe.”

TCS said that its board has declared an interim dividend of Rs 10 per equity share of Rupee 1 each. The interim dividend shall be paid on Monday, August 5, 2024

--TCS net profit rose 9 percent to Rs 12,040 crore from Rs 11,074 crore in the year-ago period.

--Revenue from operations increased 5 percent to Rs 62,613 crore for the June quarter as against Rs 59,381 crore in the same quarter last fiscal.

TCS shares closed marginally lower at Rs 3,905.40 apiece on BSE ahead of earnings report. The IT firm's market cap stood at Rs
14.11 lakh crore.

--For the year ending March 2024 Tata Consultancy Services has declared an equity dividend of 7300.00% amounting to Rs 73 per share. At the current share price of Rs 3910.20 this results in a dividend yield of 1.87%.
--The company has a good dividend track report and has consistently declared dividends for the last 5 years.
--TCS has declared 85 dividends since October 28, 2004.

Benchmark indices Nifty and Sensex pared all gains to slip into the red as investors opted to book profit, with the market consolidating ahead of the Q1FY25 results of Tata Consultancy Services and the eagerly anticipated 2024 Union Budget on July 23.

At noon, the Sensex was down 0.30 percent at 79,687 and the Nifty fell 0.24 percent at 24,265. About 1,957 shares advanced, 1,342 shares declined, and 92 shares were unchanged

Here's what analysts expect in the upcoming TCS Q1 results

--BNP Paribas stated in a sector preview report that they anticipate sequential revenue growth of 1.2% in constant currency terms and 1.1% growth in reported dollar terms for TCS.

--They attributed this forecast to the BSNL deal ramp-up being countered by ongoing deal ramp-downs and a slower-than-expected recovery in the banking, financial services, and insurance (BFSI) sector.

Shares of TCS were trading 0.08 percent lower at Rs 3,906 apiece on NSE at 13:52 pm ahead of earnings report.

K Krithivasan had earlier said, "It will be difficult to call on when the growth would return. I don't want to hazard a guess, we've been actually now saying for second quarter FY25, we expect this to be a better year than FY24. But to say that growth would be returning in Q1 or Q2, will be calling in too soon."

He added that the reason that he said FY25 will be better than FY24 is also based on the fact that the major markets will start turning around (in) some time, though Krithivasan didn't specify which quarter. But it's coming from both aspects (US/Europe and India/Latin America), and it is not purely based on regional markets, he said.

--TCS reported 9 percent rise in consolidated net profit at Rs 12,434 crore (attributable to shareholders) for the fourth quarter of FY24 as against Rs 11,392 crore in the year-ago period.

--Revenue rose 3.5 percent to Rs 61,237 crore in the three months ended March 31, 2024.

--The EBIT margin or the operating margin was up at 26 percent for Q4, a 100 bps increased from 25 percent in the previous quarter; beating Moneycontrol’s estimates.

--For the full year of FY24, revenue grew by by 6.8 percent YoY to Rs 240,893 crore. Net profit for the year was at Rs 46,585 crore. Operating margin for the year was 24.6%.

Emkay Global builds in a 1.6% QoQ USD revenue growth after factoring 40 bps cross-currency headwinds for TCS in Q1. It expects an incremental 0.4% QoQ contribution ($30 million) from the BSNL deal. EBIT margin is likely to decline by ~150 bps QoQ due to wage hikes.

--“Wage hike is the major margin headwind for TCS. We however expect its impact to be partially offset by operational efficiencies,” JM Financial said in its research report.

--Kotak Institutional Equities anticipates a quarter-on-quarter decline in operating margin, attributing this to wage revisions and a probable decrease in utilisation rates.

--ICICI Securities highlighted that revenue growth in the June quarter would be driven by traction in BFSI, retail (consumer business group), and hi-tech sectors.

The momentum from the BSNL deal is expected to bolster TCS's growth, according to various research reports. In April, TCS announced its plan to set up large data centres across four regions of the country as part of a Rs 15,000-crore deal with Bharat Sanchar Nigam.

Shares of TCS were trading 0.098 percent lower at Rs 3,906.05 apiece on BSE around noon ahead of earnings report. For the year till date, shares of TCS are higher by only 3 percent, while compared to a year ago, TCS share prices are up by 20 percent.

TCS may have added over 10,000 employees in Q1FY25, which would be the first sequential headcount growth in a year. A Prabhudas Lilladher note has said that salary hikes could hurt margins, although the pace of wage increases has slowed down.

TCS management’s comments on the following aspects are closely being watched:
-Demand environment across geographies
-Discretionary spending
-Deal announcements in Q1FY25
-Campus hiring
-Large deals in Q1FY25

Tata Consultancy Services will kick off the Q1FY25 earnings season today with street experts anticipating a rise of 1.6 percent quarter-on-quarter in the revenue to Rs 62,190 crore. Moneycontrol has collated estimates from 10 brokerage firms which is hinting at a revenue bump up.

The earnings fineprint is expected to throw light on how the much-anticipated recovery is shaping up. “Wage hike is the major margin headwind for TCS. We however expect its impact to be partially offset by operational efficiencies,” a JM Financial note on TCS has said.

Tata Consultancy Services (TCS) will kick off the Q1FY25 earnings season this evening with street experts anticipating a rise of 1.6 percent quarter-on-quarter in the revenue to Rs 62,190 crore. Moneycontrol has collated estimates from 10 brokerage firms which is hinting at a revenue bump up.

Good morning! Stay tuned to our TCS Q1 results 2024 live blog for the latest updates.