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In an indication that the worst may be over for the IT services sector, Tata Consultancy Services announced a 9.1 per cent growth in profit to ₹12,434 crore in the final quarter of FY24, versus ₹11,392 crore reported in the same period last year. On a sequential basis, profit was up by 12.4 per cent, versus profit of ₹11,058 reported in the previous quarter.
This growth can be attributed to a strong rise in India revenue (up 37.9 per cent), a revival in the UK business (up 6.2 per cent), and the regional markets vertical (up 9.7 per cent). Even as key markets such as the United States and Europe see macroeconomic recovery, the IT major reported a negative growth of 2.3 per cent in North America. Top verticals such as BFSI, and consumer business saw negative growth in Q4FY24 as well, degrowing by 3.2 per cent and 0.3 per cent respectively. However, there has been a moderation in degrowth.
Order book rises
Order book recorded for FY24 was at $42.7 billion and for Q4FY24 at $13.2 billion, both an all-time high led by the mega deal.
K Krithivasan, CEO of TCS, expects the turnaround to come in the next fiscal year, FY25, however, he did not give any specific timeline for the same.
Revenue for operations grew year-on-year by 3.5 per cent to ₹61,237 crore in Q4FY24 against ₹59,162 crore of revenues reported in the same quarter in the previous year.
Operating margins improved by 1 per cent to 26 per cent in Q4FY24, versus operating margins for 25 per cent seen in Q3FY24.
Samir Sheksaria, CFO of TCS, aid that TCS is comfortable with margins being in the 26-28 per cent band.
The total collective value (TCV) for the order book stood at 13.2 billion in Q4FY24, with North America TCV being $5.7 billion; BFSI TCV at $4.1 billion, Consumer Business TCV at $1.6 billion.
Krithivasan noted that except for one large deal, the TCV was largely made up of regular deals.
He also said the order book has improved across all geographies. While Krithivasan mentioned that he is happy with acquisition of clients, especially bringing two more clients in a low growth year – he did not comment on the delay in converting deals to live projects which contribute to the IT major’s revenues. For the most part this is the reason why TCS has seen slow business in FY24, as tech demand slowed down in 2024 fiscal wherein clients were reluctant to start projects in the immediate term.
Krithivasan expects growth to return in FY25, as the macroeconomic environment in key markets such as the United States and Europe has started to turn around but he did not give a specific timeline for the same.
Headcount falls
Attrition in the LTM IT was 12.5 per cent for the whole of FY24. Headcount at the end of FY24 stood at 601,546 – 1,759 associates less than the headcount for Q3FY24. Total headcount for TCS has now reduced for four consecutive quarters. This is the first time in nearly two decades that TCS has reported lower headcount for the full year compared to the previous year.
TCS CHRO Millin Lakkad said that attrition is now in the comfortable band, but it might still reduce by 30-50 basis points. Lakkad did not give a clear projection on future hiring, merely indicating that hiring will follow patterns from the years before.
Wage hike
The management also announced a wage hike starting April of 4.7 per cent. Top performers at the company will get double digit wage hikes.
Q4FY24 was the last quarter for TCS COO, N Ganapathy Subramaniam. Speaking of the BSNL rollout in his outgoing comments, Subramaniam noted that there has been a delay in rolling out the 4G network for the government operator, but, TCS has set up 10,000 towers till now. Subramaniam expects that TCS will complete the first contract with BSNL in the next 2-3 quarters.
Krithivasan added that they don’t intend to appoint a new COO, noting Subramaniam’s responsibilities will be distributed amongst the senior leadership.
Biswajit Maity, Sr Principal Analyst at Gartner, said: “In Q4, TCS showed strong momentum with a year-over-year increase in profit percentage. Its primary strength lies in its customer-centric approach, where it invests in cultivating deep, trusting, and enduring client relationships. The recent large deals, combined contributed to TCS’s positive growth momentum and assisted TCS in preserving its strategic position among its clientele.”
“ Since the IT spending budgets have been finalized by the end of March, we expect an uptick in deal acquisitions and project ramp-ups commencing in Q1FY25, thus reinforcing TCS‘s optimistic outlook,” said Dhruv Mudaraddi, Research Analyst, Stoxbox
TCS announced a dividend of ₹28 per share for Fy24
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