Tata Consultancy Services (TCS), on April 12, said it will not hazard a guess on when growth will return for the company. However, the financial year 2024-25 will surpass the immediately previous one, Chief Executive Officer K Krithivasan said while addressing the media after declaring results for the quarter ending March 31, 2024.
Indian information technology (IT) companies have been struggling with dwindling growth amid an uncertain macroeconomic demand. For the full year of FY24, revenue grew by a mere 6.8 percent YoY to Rs 2,40,893 crore. This growth rate has more than halved from the financial year 2022-23, which stood at 17.6 percent.
“It will be difficult to call on when the growth would return. I don't want to hazard a guess… to say that growth would be returning in Q1 or Q2, will be calling in too soon,” said Krithivasan.
He believes TCS will outperform in FY25 compared to FY24, because he expects potential turnaround of major markets very soon. “But it's (growth) coming from both aspects (US/Europe and India/Latin America), and it is not purely based on regional markets,” he added.
IT companies, including TCS, have had a weak FY2023-24 as businesses tightened their wallets and cut down on discretionary spending in the US, which is one of the biggest markets for Indian IT companies.
The largest markets of Indian IT companies -the US and Europe- are going through an uncertain macroeconomic condition, coupled with high inflation. This has led businesses to tighten their wallets and cut down discretionary spending.
Krithivasan added that regional markets such as India will continue to grow despite the contribution being quite small. "But we believe that there's much greater potential in India, Latin America, and other markets and we should continue to focus," he said.
India’s sudden growth
A major surprise this quarter was the geography-wise growth being led by India, which is a small regional market in terms of revenue contribution. The company clocked in 37.9 percent YoY growth in CC terms for Q4, driven by the $1.8-billion BSNL deal.
The other verticals either contracted or grew much slower than India market.
Explaining the opportunity, Chief Operating Officer (COO) and Executive Director N Ganapathy Subramaniam said, “India is on a significant growth path, several large opportunities are available. At the same time, it's very, very difficult to win some of these deals, because the kind of things that you need to bring together — large-scale projects will be huge asset-driven projects, sometimes they will be services and third-party products, and the payment terms.”
He added that while BSNL-type large deals are available in the market, TCS makes a calculated move to decide which ones to participate in.
“We do at least one of these projects every year, for example the Passport Seva project. We have taken these as nation-building projects. At least one, every few years we do. That journey will definitely continue and India is a very strong market for us,” he said.
TCS reported its Q4FY24 earnings on April 12. Net profit grew by 9 percent YoY at Rs 12,434 crore. Revenue for the quarter rose 3.5 percent to Rs 61,237 crore in the three months ended March 31.
For the full year of FY24, revenue grew by 6.8 percent YoY to Rs 2,40,893 crore. Net profit for the year was at Rs 46,585 crore, growing 10.5 percent YoY. Operating margin for the year was 24.6 percent.
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