TCS Q2 Results Highlights: Strong deal momentum delivered us very large order book says TCS CEO and MD K Krithivasan

The live blog session has concluded. For more news, views and updates, stay tuned with Moneycontrol.com

India’s biggest IT services player’s consolidated revenue for the quarter came in at Rs 59,692 crore. TCS's order wins for Q2 stood at $11.2 billion, which was higher quarter-on-quarter (QoQ). Its EBIT margin for the quarter increased to 24.3 percent compared to 23.2 percent (QoQ). The dollar revenue for the IT major stood at $7,210 million. Sequentially, PAT beat estimates but rupee revenue growth came in below estimates. Listen in

Tata Consultancy Services (TCS) reported a strong order book of $11.2 billion for the second quarter of fiscal year 2024. The IT services major won some of the largest deals in the sector this quarter, beating macroeconomic challenges and surpassing its own quarterly deal win guidance of $7-9 billion. Read here

Post the Q2 Earnings launch Tata Consultancy Services (TCS) said that it is building its own ChatGPT equivalent to be used for enterprise code generation, its chief operating officer N Ganapathy Subramaniam has said. The project, which is at a very initial stage right now, is looking to harness the vast internal code, data and resources that the country’s largest software services firm has. The solution will be built through in-house algorithms that use large language modelling functions similar to generative artificial intelligence

“Our focus on improving employee utilization, while driving productivity improvement and cost efficiency across the organization, has helped us expand our operating margin to 24.3%. We will continue to push the growth, efficiency and innovation levers to further improve our profitability. In keeping with our shareholder friendly capital allocation policy, the Board has recommended a share buyback to the tune of `17,000 crore at `4,150 per share,” Samir Seksaria, Chief Financial Officer, said:

-“We continue to make investments in our people and new technologies. We now have a 100,000-strong pool of Gen-AI Ready consultants and prompt-engineers who are engaged in hundreds of Gen-AI projects for our clients across segments,”N Ganapathy Subramaniam, Chief Operating Officer and Executive Director, said

"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 MD and CEO K Krithivasan said

“Our strategy of proactively hiring bright freshers and investing in training them with the right skills is paying off. With that talent coming on stream and with reduced attrition, we were able to recalibrate our gross additions, keeping it below the departures during the quarter, driving up productivity and enhancing project outcomesM,” Milind Lakkad, Chief HR Officer, said

Tata Consultancy Services (TCS) on October 11 reported a net profit of Rs 11,342 crore for the September quarter of the current financial year, driven by a strong order book, especially in the BFSI segment, despite a tough business environment.Read here

Tech Giant TCS has said that it has over 250 gen AI opportunities in the pipeline

Tech giant TCS has announced that its order wins were $11.2 billion for Q2,the company witnessed higher Quarter on Quarter growth

-TCS has approved a share buyback of Rs 17000 crore
-TCS announced an interim dividend per share of Rs 9
-TCS buyback has been priced at Rs 4,150 per share

-TCS consolidated Net Profit Rs 11,342 crore
-Tech giant TCS' consolidated revenue stands at Rs 59,692 crore for Q2
-EBIT Margin is at 24.3% Vs 23.2% (QoQ).

-The CNBC-TV18 poll projection suggests that in the second quarter, TCS’ margin would improve by 45 basis points (bps) after a 120 bps decline in the June quarter due to wage hikes.
-However, it must be noted that margin recovery is unlikely to be as strong as what is typically seen in the September quarter. In the corresponding quarter last year, the firm’s margin had improved by 90 bps.

Analysts suggests that the deal wins should bode well for TCS’ recovery in FY25. The CNBC-TV18 poll of analysts pegs FY25 constant currency (CC) revenue growth at 9- 9.5 percent versus 5-5.5 percent in the 2023-24 fiscal.

TCS, India's top tech services company, is set to unveil Q2 FY24 earnings, with analysts expecting moderate growth amid weak discretionary spending. Despite significant deal wins, the company faces a profit realization time lag. Read here

Analysts polled by CNBC-TV18 expect TCS’ revenue, in dollar terms, to rise 0.75 percent to $7280 million as compared to $7226 million in the previous quarter. In rupee terms, they believe a rise of 1.3% on a quarter-on-quarter basis to Rs 60,160 crore as against Rs 59,381 crore is likely.

Nifty builds on yesterday’s gains; conquers 19,800. Almost all sectors in green barring the PSU banking pack. Realty at record high; FMCG, autos among gainers . IT gives up gains; PSU banks among laggards. NSE advance-decline ratio at almost 2:1. Mid & smallcap indices gain another 1%. Catch Yatin Mota and Nandiyta Khemka as they discuss stocks on their radar including SUntech, TVS Motors and TCS. Watch here

-Indian Tech giant, TCS is in the secular uptrend with a higher top higher bottom formation.
-After registering an all-time of Rs 4043 in January 2022, the stock went into a sideways correction due to the known factors but recently it has given a breakout from a Symmetrical Triangle Formation (Monthly chart) which was confirmed with a positive crossover in MACD and ADX while the lower time frame also boosting the confidence by giving a breakout from the Cup and Handle formation (Weekly chart).
-As per the triangle breakout, the long-term target is Rs 4500 while in the short to mid term one can expect the target of Rs 4000.

Nifty IT index slips to day's low as tech shares turn nervous ahead of TCS earnings

-Shares of Tata Consultancy Services Ltd. (TCS) were trading nearly half a percent lower ahead of the company's September quarter earnings announcement.
-This is after the stock traded close to its 52-week high of Rs 3,680, earlier in the day.
-The stock has been in focus as the company, along with its earnings, will also consider a share buyback proposal as well as declare an interim dividend. If approved, this will be TCS' fifth share buyback in the last six years

-TCS will consider a share buyback proposal in its board meeting.
-The company had last announced share buyback of up to Rs 18,000 crore entailing 4 crore shares at Rs 4,500 apiece which closed in March 2022.
-This latest one to be announced later in the day will be the fifth share buyback in six years.

The low price of Tata Consultancy Services stock today was Rs 3607.75 and the high price was Rs 3664.

-Analysts suggest that the focus will be on gauging whether the worst is behind the IT industry and if demand is picking up.
-Analysts polled by CNBC-TV18 expect TCS’ revenue, in dollar terms, to rise 0.75% to $7280 million as compared to $7226 million in the previous quarter. -In rupee terms, they believe a rise of 1.3% on a quarter-on-quarter basis to ₹ 60,160 crore as against ₹ 59,381 crore is likely.

-The second quarter of the financial year witnessed several significant developments at TCS.
-The firm secured notable deal wins, including an 800 million pound deal with Jaguar Land Rover (JLR) for five years (from an existing client); and an 840 million pound deal with NEST, the UK's largest workplace pension scheme, for 10 years, announced in June.
- If the NEST deal is extended, the total value of the contract in its 18-year tenure would reach £1.5 billion.

-Expect sequential CC revenue growth of 0.9% in Q2E. Weak discretionary spending in North America and hit to old managed services deals may dampen the momentum.
-However, expect some growth support from Energy, Lifesciences and Manufacturing (from JLR deal worth USD1bn). Expect weakness to continue in Telecom.
-Large deal win rate around vendor consolidation may determine TCS’ positioning on growth leadership. Any leakage of revenue/ project cancellation on the back-fill of discretionary projects is the key risk.
-Expect EBIT margin expansion of 100bps QoQ on absent wage hikes and industrylow subcontracting costs. We expect SG&A to come back to Q4FY23 levels.

-Key metrics to monitor are:
1) Discretionary spending commentary,
2) BFSI spending environment,
3) Manufacturing vertical growth – resilient in past four quarters
4) Demand outlook for North America is crucial.
-The sentiment is turning positive but discretionary spending still remains uncertain.

-The growth is expected to stay muted due to weak macro. Expect 1.1% QoQ CC growth for 2QFY24
-EBIT margin is expected to improve 90bp QoQ, after the wage hike impact in Q1
-The deal pipeline should remain resilient, especially in the UK regions, while the US and Europe continue to stay on a weaker trajectory.
-Outlook on near-term demand environment, BFSI, and deal wins are the key monitorables.

-The growth is expected to stay muted due to weak macro. Expect 1.1% QoQ CC growth for 2QFY24
-EBIT margin is expected to improve 90bp QoQ, after the wage hike impact in Q1
-The deal pipeline should remain resilient, especially in the UK regions, while the US and Europe continue to stay on a weaker trajectory.
-Outlook on near-term demand environment, BFSI, and deal wins are the key monitorables.

TCS is expected to report revenue growth at 0.8% in CC terms due to weak discretionary spends, with ~20 bps cross- currency headwinds to result in reported USD revenue growth of 0.6% q-o-q. EBIT margins are likely to improve by ~80 bps q-o-q, aided by operating efficiencies.

- TCS shares have risen during the September quarter, driven by strong deal wins and expectations of demand revival for 2024-25.

- The stock increased by 6.8 percent during the three-month period (from Rs 3,302 to Rs 3,528), while the Nifty IT index rose 7.5 percent during the quarter.

- TCS’ profit after tax (PAT) for the July-September quarter is expected to rise 3.12 percent quarter-on-quarter to Rs 11,420 crore, according to an average of five brokerages’ estimates.

- The firm is likely to report a quarter-on-quarter increase of 1.5 percent in revenue to Rs 60,270crore for the quarter.

- TCS's EBIT margin to improve by 60 bps to 23.8% primarily aided by operating efficiencies, says Dinesh Gupta, Fund Manager at Torus Oro PMS.

- "TCS continue to win large deal, but we would closely watch for the management commentary on demand scenario," Gupta further added.

- According to a CNBC-TV18 Poll, it is expected that the company's revenue will see a 0.75 percent increase to $7,280 million in dollar terms, compared to $7,226 million in the previous quarter ending June 2023.

- In rupee terms, a quarter-on-quarter revenue growth of 1.3 percent is projected, reaching Rs 60,160 crore, as compared to Rs 59,381 crore in the June quarter.

- Tata Consultancy Services will announce its will announce its results for the second Quarter of FY 2024, ended September 30, today after-market trading hours.

- There will be a press conference held at 5:30pm.

- The IT company will also host an Earnings conference call at 7:00pm.

- Shares of TCS were trading at Rs 3,634.85, up 0.17 percent.

- TCS's decision to bring all employees back to the office signals a shift towards a more traditional work setup after a period of remote work. This move is aimed at boosting utilisation levels and promoting a collaborative and interactive work environment within the office premises.

- Notably, transitioning back to full office-based work might also lead to an increase in overhead costs. These costs can include office space maintenance, utilities, transportation allowances, and other associated expenses.

- The balance between utilisation levels, employee preferences, productivity, and cost considerations will be critical for TCS and other companies as they navigate this transition and decide on the optimal working model for the future.

- According to Motilal Oswal Financial Services, TCS is expected to observe a significant margin recovery of 90 basis points (bps) QoQ following the wage hikes in Q1.

- However, growth is expected to remain subdued due to weak macroeconomic conditions. Projections indicate an expected 1.1 percent QoQ cc growth for the September quarter.

- The commencement of the 2nd-quarter earnings season by TCS on October 11th not only serves as the symbolic starting signal but also paves the way for potential share buybacks alongside the Q2 results, said Prashanth Tapse, Senior VP (Research) at Mehta Equities Ltd.

- "TCS, boasting a robust cash balance of Rs 15,622 crore as of June 2023 and the noteworthy absence of debt, finds itself in a formidable financial position," Tapse further added.

- Some brokerages expect that the size of the latest buyback from TCS will align with previous ones, while others believe it could exceed Rs 20,000 crore.

- Morgan Stanley is reportedly estimating a size between Rs 18,000 and 22,500 crore for the buyback.

- However, the brokerage notes that while a buyback has been anticipated for the last two quarters, its recent announcement does not guarantee the stock's outperformance, PTI reported.

- We expect TCS to post a low single-digit growth in revenue sequentially as slowdown in the IT sector due to adverse macroeconomic conditions in the last two quarters persists, Dhruv Mudaraddi, Research Analyst, Stoxbox said.

- The company’s EBITDA margins are expected to improve sequentially after a 120bps decline in the June quarter due to wage hikes, Mudaraddi further added.

- Shares of TCS were trading at Rs 3,640.15 apiece, up 0.31 percent.

- TCS's approach to net headcount addition and bench strength management is a strategic decision influenced by various factors, including demand projections, project pipelines, and operational efficiencies.

- In the first quarter, TCS had a net headcount addition of 523 people, showcasing a different approach compared to its peers—Infosys Ltd, HCL Technologies Ltd, and Wipro Ltd— who experienced a decline in headcount.

- Tata Consultancy Services's Q2FY24 earnings call: LIVE coverage

- In Q1, TCS was the only company to have a positive net addition of 523 people.

- TCS was also the only IT company to share its fresher hiring target of 40,000 for FY24.

- TCS is expected to clock a revenue of Rs 60,353 crore in comparison to Rs 59,381 crore in the first quarter, according to Bloomberg.

- The net profit is likely to show a 3 percent sequential increase, reaching Rs 11,409 crore.

- Shares of Tata Consultancy Services

- Tata Consultancy Services has bought back its shares in 2017, 2018, 2020, and 2022.

- The IT behemoth, valued at more than Rs 13 lakh crore, has bought back shares worth Rs 66,000 crore in the last six years.

- $1.1 billion deal from the UK’s workplace pension scheme NEST.

- A mega $1 billion deal with Jaguar Land Rover (JLR) to develop "future-ready" digital services for the luxury carmaker's clients.

- TCS reported some of the largest new deals in 2023 as well as multi-year renewals with existing clients.

- According to analysts, the management’s commentary on the revival of discretionary spending, outlook on macroeconomic challenges, cost takeout and vendor consolidation deal pipeline and the impact of GCC ramp-ups will be in focus.

- Tata Consultancy Services is set to announce its fifth share buyback in six years, rewarding investors with the increasing cash in its reserves.

- Before this, TCS has bought back its shares in 2017, 2018, 2020, and 2022.

- TCS shares have traded mostly flat for the last two sessions.

- TCS stock ended at Rs 3,629 on October 10.

- Profit after tax (PAT) is estimated to be up by 0.8 percent QoQ at Rs 11,162 crore.

- Like the previous couple of quarters, this quarter, too, will remain subdued.

- The anticipation of single-digit growth in revenue and profit for TCS, India's largest software service exporter, aligns with the broader outlook for the IT sector. Global economic triggers, such as geopolitical tensions, and shifts in technology spending patterns, have impacted various industries, including the IT sector.

- Many large companies are navigating through these challenges, adapting strategies, and focusing on resilience and agility to sustain growth in this evolving landscape. It will be interesting to observe how the IT sector strategises and responds to these dynamics.

- More significantly, the consideration of a share buyback proposal by the TCS board is a significant development that market observers are keenly watching. The decision regarding a share buyback can impact the company's stock price and influence investor sentiment.

- IT giant Tata Consultancy Services is all set to kick off the earnings season for the second quarter of FY24.