The company’s operating margin decreased from 24.5 per cent in Q4FY23 to 23.2 per cent in Q1FY24, a 130 basis point decline. It increased merely 0.1 per cent year over year.
TCS hinted that clients are still focusing on cost optimisation amid macro headwinds.
“Clients continue to reprioritise, preferring business critical projects and those with a faster ROI (return on investment). Cost optimisation, vendor consolidation and integrated operations are high on priorities,” TCS said.
“Enhanced flexibility, resilience, and establishment of a solid foundation continue to drive transformation initiatives. Growth was led by cloud modernisation, cyber security, IoT (internet of things) and digital engineering,” the IT major said.
Let’s take a look at the key highlights of TCS’ Q1FY24 scorecard
The numbers
TCS earned ₹11,074 crore in Q1FY24 which was up 16.8 per cent YoY while the company’s revenue for the quarter stood at ₹59,381 crore, rising 12.6 per cent YoY. The company’s revenue growth in constant currency terms rose 7 per cent YoY. The operating margin during the quarter under review expanded modestly by 0.10 per cent YoY to 23.2 per cent.
Read more: TCS Q1 Results: Net profit jumps 16.84% on year to ₹11,074 crores; declares dividend
UK Leads Regional Markets
TCS said the United Kingdom (UK) led among major markets, with 16.1 per cent growth while North America grew 4.6 per cent and Continental Europe grew 3.4 per cent in Q1FY24. In emerging markets, Middle East & Africa grew 15.2 per cent, India grew 14 per cent, Latin America grew 13.5 per cent, and Asia Pacific grew 4.7 per cent, the IT major said.
Life Sciences and Healthcare Lead Growth; BFSI Sees Mild Growth
Among the industrial segments, TCS said growth was led by life sciences and healthcare which grew 10.1 per cent and the manufacturing vertical grew 9.4 per cent during the quarter.
The BFSI (banking, financial services and insurance) segment saw a mild growth of 3 per cent, while retail and CPG grew 5.3 per cent. Technology and services grew 4.4 per cent while communications and media grew 0.5 per cent.
Human Resources
TCS saw mild net addition in its workforce during the June quarter. It said its workforce stood at 615,318 as on June 30, with a net addition of 523 during the quarter.
“The workforce continues to be very diverse, comprising 154 nationalities and with women making up 35.8 per cent of the base.
The company rolled out its annual salary increase across its workforce, with effect from April 1, 2023,” the company said in its BSE filing.
“Year till date, 1,03,000 employees were trained in high-demand competencies and collectively, TCSers clocked 12.7 million learning hours and acquired 1.3 million competencies. IT services attrition dipped further in Q1 and was at 17.8 per cent for the last twelve months,” said TCS.
Dividend
The company’s board of directors declared an interim dividend of ₹9 per equity share of ₹1 each of the company. TCS said the interim dividend shall be paid on Monday, August 7, 2023, to the equity shareholders of the company. The record date for the purpose is Thursday, July 20, 2023.
Management Commentary
The management said it is confident in the longer-term demand for its services and it is building capabilities in new technologies.
“It is very satisfying to start the new fiscal year with a string of marquee deal wins. We remain confident in the longer-term demand for our services, driven by the emergence of newer technologies. We are investing early in building capabilities at scale on these new technologies, and in research and innovation, so we can maximise our participation in these opportunities,” said K Krithivasan, Chief Executive Officer and Managing Director.
N Ganapathy Subramaniam, Chief Operating Officer and Executive Director said: “Our products and platforms achieved major milestones during the quarter with several transformational engagements going live. In the UK Life and pension administration space, we signed three new deals on our digital insurance platform, making TCS the undisputed leader in this market on any metric.”
“We are proactively building differentiating capabilities in generative AI and actively working on such projects with our clients, delivering impact on technology, operations and client experience dimensions.”
The company’s Chief Financial Officer, Samir Seksaria, said that the company rolled out its annual salary increase with effect from April 1.
“Our operating margin of 23.2 per cent reflects the 200-bps impact of this hike, offset through improved efficiencies. At the same time, we continue to make the investments needed to power our future growth, including expansion of our delivery and research infrastructure,” said Seksaria.
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Updated: 12 Jul 2023, 05:10 PM IST