TCS: Quarterly Result Update
12-04-2022

Tata Consultancy Services | Market Cap: ~Rs. 13,57,508 Cr

CMP 3,710 | P/E 30x FY23

Quarterly Result: Tata Consultancy Services (TCS) reported 3.5% growth in sales over previous quarter (and 15.8% growth year on year). Operating profit/EBITDA grew 3.2% over previous quarter and 7.6% year on year.

Annual Result: On full year basis, revenue increased 15.4% YoY and EBITDA increased 14.5%. Operating margins contracted 60bps versus previous year to 25.3% due to higher attrition.

Key highlights:

BFSI grew 12.9% year on year followed by 22% in Retail. Other verticals grew in high teens.
TCS does not have significant operations in Russia and Ukraine. TCS has less than 5,000 people in Eastern Europe with the largest operation in Hungary.
Large deal wins adding 10 new $100mn clients. TCV stood at US$ 11.3 bn, a solid growth of 23% and partly aided by two mega-deals of ~US$1 bn each.
The margins reduced because of high attrition, increase in discretionary costs including travel as employees returning to office.
TCS had proposed to buy back up to 4 Cr shares for an aggregate amount not exceeding Rs. 18,000 crore, (1.08% of the total paid up equity share capital), at Rs 4,500 per share. The offer was subscribed more than 7.5 times.
Attrition rate at 17.4%, lowest in the industry. The company added 35,209 employees on a net basis during the quarter, taking the total number of employees to 592,195 as on March 31, 2022.
The company has declared a dividend of Rs. 22 per share.

Management Outlook: As per the management, the order book in BFSI sector is healthy (32% revenue share in FY22) as tech spending of banks globally is strong. Growth momentum is expected to pick up in Q1FY23. The management stated overall demand outlook as good and TCS finds itself in a better position on demand compared to 12 months back.