Tata Consultancy Services kicked off the first quarter of FY25 with an 8.8 per cent year-on-year growth in profits to ₹12,105 crore. During the same time last year, the IT behemoth has reported a profit of ₹11,120 crore. On a sequential basis, profit fell by 3.1 per cent, as the firm reported a profit of ₹12,502 crore in the previous quarter.
Regional markets continue to outperform western geographies when it comes to growth. India revenue rose by 61.8 per cent, meanwhile the revival in UK business has stagnated reporting a y-o-y growth of 6 per cent. North America and Continental Europe continue to show minimal recovery. The IT major reported a negative growth of 1.1 per cent in North America, although granted that the degrowth has moderated since the last quarter. Revenues only grew by 0.9 per cent in Continental Europe. Top verticals such as BFSI and Consumer Business continue to show degrowth of 0.9 per cent and 0.3 per cent. Although granted that there has been moderation in degrowth here as well.
Even as the management maintains that FY25 is expected to be better than FY24, they were ready to call out when economic recovery begins decisively in the US and Continental Europe. “Growth this quarter remains similar to last quarter, that is the reason that we are not ready to call out growth,” K Krithivasan, CEO of TCS, said at the press conference.
Drop in deal wins
The IT firm also saw a sharp drop in deal wins in the first quarter of FY25 with the order book at $8.3 billion.
Its total contract value (TCV) for the quarter was 18.6 per cent lower from the $10.2 billion from the previous year and 37 per cent down from the previous quarter, the company said on July 1
The management gave guidance of an order book between $7-9 billion going forward. They further added that AI has a $1.5-billion pipeline at present.
Revenue grew year-on-year by 5.2 per cent to ₹62,613 crore in Q1FY25 against ₹59,381 crore of revenues reported in the same quarter in the previous year.
Operating margins fell from the target 26 per cent achieved last quarter to 24.7 per cent in Q1FY25. Reduction in operating margin comes from the absorbing of the wage hike.
Attrition level
Attrition in the LTM IT continued to fall to 12.1 per cent in Q1FY25, in FY24 the attrition numbers were 12.5 per cent. Headcount at the end of Q1FY25 stood at 6,06,998. After reducing headcounts for four consecutive quarters, TCS added 5,452 associates in Q1FY25.
TCS CHRO Milind Lakkad noted that attrition trend has largely stabilised and is not expected to change more than a few basis points going forward.
Hiring plan
Lakkad also added that the IT firm had hired 11,000 trainees in this quarter, contributing to the positive net addition seen at present. Lakkad deferred from predicting whether the IT firm will continue to increase its headcount going forward, stating that the IT firm will hire close to 40,000 freshers this financial year.
Krithivasan further added that TCS is expected to complete network rollout for BSNL by this fiscal-end.
The company has declared an interim dividend of ₹10 per equity share of ₹1 each of the company.
Reacting to the results, Manish Chowdhury, Head of Research, StoxBox said, “TCS’ Q1FY25 result gave a mild surprise on the upside as sequential CC revenue growth of 2.2 per cent reflected an improving business environment in the US. Large deals made in the last year seem to be getting converted into revenue along with the ramp-up of the BSNL deal. The lowering attrition and the net headcount addition is a major positive and augurs well for the company’s utilisation levels and subsequently its EBIT margin. Despite wage hikes in the quarter TCS managed to report a beat on EBIT margin estimates.”