TCS Q4 Results , TCS Results, Fundamental Analysis of TCS
TCS (Tata Consultancy Services), India’s largest software services exporter, today reported its March quarter numbers. We are going to present TCS Q4 results in this article.
Table of Contents
TCS Q4 Result Synopsis
Revenue in rupee terms showed better performance. Dollar Revenue was up 7.4% YoY to USD 7,195 mn. Rupee revenue grew by 16.9% YoY to INR 5,91,620 mn.
Due to lower employee expenses, operating leverage, and lower subcontractor expenses, operating margin came in at 24.5%, an expansion of 24.5%.
TCS reported net profit of INR 1,14,360 mn (margin @ 19.3%).
Demand environment seems to be stable as TCS booked deals worth USD 10 billion which includes a major deal worth US$700mn with the Phoenix Group. Of all the deal wins, BFSI segment registered a deal win of USD 3bn and retail & CPG segment booked deals worth 1.3bn .
A strong cash conversion was registered by the company as the operating cash flow was at 104.1% of the Net income.
TCS eps (earnings per share) has improved from Rs 26.85 in Q4 FY22 to Rs 31.14 in Q4 FY23. On a sequential basis, it improved from Rs. 29.64 in Q3 FY23 to Rs. 31.14 in Q4 FY23 .
Key Takeaways of Concall
- Newer initiatives which were not critical were being deferred by clients and in some cases discretionary projects were being completely halted.
- An uptick in deal wins in Europe regions is expected whereas some deal softening is expected in US due to the anxiety around the stability of banking sector.
- The management’s view about attrition is that it has peaked out and it expects quarterly attrition to moderate in the coming quarters.
- TCS, so far, has applied for 7305 patents of which 171 were applied in the current quarter. The company has been granted 2878 patents so far out of which 184 patents were granted in the last quarter only.
TCS Q4 Results
Net Sales -TCS Q4 Results
TCS revenue rom operations increased to ₹59,162 crore, compared with ₹50,591 crore in the same quarter last year, clocking a jump of 16.9% YOY.
All industry segments witnessed strong growth while application and data modernization for improved experience and business solutions witnessed noticeable traction.
Internally – from a talent perspective and externally – from a solutions point of view, cloud and data continue to be big demand generators. Resilience of demand for their services is evident in the strength of their order book.
Though it stood short of analyst’s estimates who were expecting a a number of 20%. Revenue growth stood at 10.7% (YoY) in constant currency terms. This is the slowest constant currency revenue growth in 11 quarters.
| Quarter | Net Sales (Rs Cr.) |
| 03-2023 | 59162 |
| 12-2022 | 58229 |
| 09-2022 | 55309 |
| 06-2022 | 52758 |
| 03-2022 | 50591 |
| 12-2021 | 48885 |
| 09-2021 | 46867 |
| 06-2021 | 45411 |
| 03-2021 | 43705 |
| 12-2020 | 42015 |
EBITDA – TCS Q4 Results
| Quarter | EBITDA (Rs Cr.) |
| 03-2023 | 15774 |
| 12-2022 | 15553 |
| 09-2022 | 14516 |
| 06-2022 | 13416 |
| 03-2022 | 13845 |
| 12-2021 | 13433 |
| 09-2021 | 13116 |
| 06-2021 | 12663 |
| 03-2021 | 12801 |
| 12-2020 | 12208 |
Net Profit – TCS Q4 Results
TCS (Tata Consultancy Services) consolidated net profit grew 14.76% YoY to Rs 11,392 crore for the March quarter compared with Rs 9,926 crore in the same quarter last year. The growth in net profit is in line with the analysts’ expectations of 14%-19% range.
The reason behind TCS not achieving the expected profit is that their clients are anticipating a slowdown in the economy and hence are holding back their spending on technology.
| Quarter | Net Profit (Rs Cr.) |
| 03-2023 | 11436 |
| 12-2022 | 10883 |
| 09-2022 | 10465 |
| 06-2022 | 9519 |
| 03-2022 | 9959 |
| 12-2021 | 9806 |
| 09-2021 | 9653 |
| 06-2021 | 9031 |
| 03-2021 | 9282 |
| 12-2020 | 8727 |
TCS Dividend
TCS has declared a final dividend of Rs 24 per share for FY23.
TCS Dividend History
Company has been paying dividends consistently for the last 5 years. Details are as follows:
| Announcement Date | Ex-Date | Dividend Type | Dividend (%) | Dividend (Rs) |
| 09-01-2023 | 16-01-2023 | Special | 6700 | 67.00 |
| 30-12-2022 | 16-01-2023 | Interim | 800 | 8.00 |
| 10-10-2022 | 17-10-2022 | Interim | 800 | 8.00 |
| 30-06-2022 | 14-07-2022 | Interim | 800 | 8.00 |
| 11-04-2022 | 25-05-2022 | Final | 2200 | 22.00 |
| 31-12-2021 | 19-01-2022 | Interim | 700 | 7.00 |
| 30-09-2021 | 14-10-2021 | Interim | 700 | 7.00 |
| 30-06-2021 | 15-07-2021 | Interim | 700 | 7.00 |
| 12-04-2021 | 25-05-2021 | Final | 500 | 15.00 |
| 12-04-2021 | 25-05-2021 | Interim | 1500 | 15.00 |
| 31-12-2020 | 14-01-2021 | Interim | 600 | 6.00 |
| 30-09-2020 | 14-10-2020 | Interim | 1200 | 12.00 |
| 30-06-2020 | 16-07-2020 | Interim | 500 | 5.00 |
| 16-04-2020 | 03-06-2020 | Final | 600 | 6.00 |
| 16-04-2020 | 03-06-2020 | Interim | 600 | 6.00 |
| 11-03-2020 | 19-03-2020 | Interim | 1200 | 12.00 |
| 10-01-2020 | 23-01-2020 | Interim | 500 | 5.00 |
| 30-09-2019 | 17-10-2019 | Interim | 500 | 5.00 |
| 10-10-2019 | 17-10-2019 | Special | 4000 | 40.00 |
Verticals that led the majority of the growth include
- Retail and CPG (up 13%)
- Life Sciences and Healthcare (up 12.3%)
Verticals where growth percentage was in single digits are
- Technology & Services (up 9.2 %)
- BFSI (up 9.1%)
- Manufacturing (up 9.1%)
- Communications & Media (up 5.3%)
- Geographical contribution to the growth is as follows
Geographical contribution to the growth is as follows
- UK (up 17%)
- North America (up 9.6%)
- Continental Europe (up 8.4%)
- Latin America (up 15.1%)
- India (up 13.4%)
- Middle East and Africa (up 11.3%)
- Asia Pacific (up 7.5%)
According to Mitul Shah – Head of Research at Reliance Securities
“TCS reported subdued performance in 4QFY23 with EBIT margin coming in at 24.5%, 59bps below our estimate of 25.1% while its PAT is slightly below our estimate by 1.1%.
EBIT grew by 1% QoQ (up 15% YoY) to Rs145 billion while EBIT margin stood at 24.5% (flat QoQ /down 47bps YoY), 59bps below our estimate of 25.1%.
Revenue grew by 2% QoQ/8% YoY in USD terms to US$7,195mn, vs. our estimate of US$7,221mn.
Revenue growth in CC terms stood at 10.7% YoY.
Its net income stood at Rs114bn (up 5% QoQ/ up 15% YoY) on the back of higher non-operating income, which grew 20% YoY and 126% QoQ.
Adjusted margin came in at 19.3%, broadly in line with our estimate of 19.4%,” says Mitul Shah – Head of Research at Reliance Securities
Management Commentary
Rajesh Gopinathan – CEO and MD said,
“It is very satisfying to look back at our strong growth in FY2023, on top of the mid-teen growth in the prior year. The strength of our order book demonstrates the resilience of demand for our services and gives us visibility for growth in the medium term.”
Samir Seksaria, Chief Financial Officer, said:
FY 23 was a year of transition, as supply-side challenges abated while pandemic-depressed travel and discretionary spends normalized.
We navigated this change well, without slowing down our investments in our people, research and innovation and intellectual property.
Our longer term competitiveness remains intact, giving us industry-leading profitability even as we pursue our growth aspirations.”
TCS COO N Ganapathy Subramaniam,
“During Q4 and through the year, we successfully delivered transformation programs of varying size and scale. Cloud and Data continue to generate huge demand both internally from a talent perspective and externally from a solutions point of view.”
TCS Q4 Results Attrition Rate
TCS Attrition rate continued to trend down and was at 20.1%. During the quarter, the company added 821 employees taking its total workforce strength to 614,795.
Company said it is going ahead with all job offers. in FY23 Company has added a total of 22600 employees on a net basis.
TCS Chief HR Officer Milind Lakkad,
During the year, we onboarded over 44,000 freshers and our highest-ever number of experienced professionals. We also doubled down on organic talent development, obtaining over 53,000 cloud certifications during the year, bringing the total to over 1,10,000 employees certified on hyperscaler platforms. This places us among the top 2 partners for the largest cloud providers.
TCS share price target (Analysts Recommendations)
| Brokerage | Rating | Price Target |
| Bernstein | Outperform | 3560 |
| CLSA | Outperform | 3550 |
| Morgan Stanley | Equal Weight | 3350 |
| Citi | Sell | 3000 |
| HSBC | Hold | 3395 |
| Macquarie | Outperform | 4510 |
| JP Morgan | Underweight | 2700 |
JP Morgan
According to JP Morgan, unexpected weakness in the US -particularly in BFSI segment, and continued challenges in Europe led to ernings miss. The firm expects near-term growth to get impacted due to cuts to discretionary spending as clients are getting cautious.
The first half of FY24 will be soft owing to uncertain macro environment and tech spend cuts, which will impact the full-year growth.
JP Morgan has cut TCS’ revenue estimates by 1 percent and margin estimates by 20 basis points.
It remains underweight on the stock with a price target of 2,700, implying a potential downside of nearly 17 percent.
Citi
Citi termed the results to be weaker than expected. It believes that with company’s lower than expected EBIT margin, coupled with regular wage hikes, margin front may have to be revised lower going forward.
Citi has given a sell rating on TCS with a price target of Rs 3,000, which is a potential downside of 7.5 percent from current levels.
Nomura
Nomura was disappointed on the revenue and margin front. They find the near term visibility for the company low. Nomura has downgraded earnings estimates of TCS by 1-2 percent and reduced the target price from Rs 2850 to Rs 2830
Bernstein
On the other hand, despite a soft quarter and headwinds on the macro levels, Bernstein finds TCS’ order book healthy. They’re comfortable with the company’s book-to-bill ratio or the numbers of orders billed compared to the ones received during a quarter. The brokerage firm expects the stock to outperform with a target price of Rs 3560 .
CLSA
CLSA thinks TCS’ medium-term outlook is reassuring because of its healthy order book and therefore, the stock is given an outperformer rating with a target price of Rs 3550 .
However the ongoing leadership change and uncertainties on the macro front are expected to weigh on the stock in near-term.