On BSE, TCS shares closed at ₹3,264.85 apiece down by ₹22.10 or 0.67%.
Aditi Patil- Research Associate at Prabhudas Lilladher on TCS said, “miss on both revenue and margins.” According to Patil, the company’s revenue grew by 1.3% QoQ in dollar terms (PLe: 2%, Cons: 1.5%) and 3.5% QoQ in CC terms (Ple: 4%, Cons: 3.6%). In dollar terms, growth was led by Retail and CPG (+4.5% QoQ), Communications & Media (+2.9% QoQ), Tech Services (+2.4% QoQ), Lifesciences and Healthcare (+2.3% QoQ). BFSI grew 1.9% QoQ. Growth was muted in Manufacturing (0.2% QoQ). Further, EBIT margin came at 23.1%, decline of 190bps QoQ (Ple: 24%, Cons: 23.5%).
Mitul Shah- Head of Research Associate at Reliance Securities said, “TCS reported a subdued performance in 1QFY23 with EBIT margin coming in at 23.1%, 60bps below our estimate of 23.7%” adding, “EBIT de-grew by 4% QoQ (up 5% YoY) to Rs121.8bn while EBIT margin stood at 23.1% (down 186bps QoQ /down 242bps YoY), 60bps below our estimate of 23.7% (Consensus 23.5%).”
Here are the 10 key highlights from the earnings.
1. Consolidated earnings:
Consolidated revenue from operations stood at ₹52,758 crore in Q1FY23 compared to ₹45,411 crore in Q1FY22 and ₹50,591 crore in Q4FY22. Constant currency revenue growth is at 15% yoy. Profit after tax (PAT) was at ₹9,478 crore up from ₹9,008 crore in Q1FY22. Compared to March 2022 quarter, PAT declined from ₹9,959 crore.
Earnings per share are at ₹25.90 compared to ₹24.35 per share in Q1FY22.
2. Margins:
In Q1FY23, the company’s net margin stood at 18%. While its operating margin dipped 2.4% yoy to 23.1% in the quarter.
Samir Seksaria, Chief Financial Officer of TCS said, “It has been a challenging quarter from a cost management perspective. Our Q1 operating margin of 23.1% reflects the impact of our annual salary increase, the elevated cost of managing the talent churn, and gradually normalizing travel expenses. However, our longer-term cost structures and relative competitiveness remain unchanged, and position us well to continue on our profitable growth trajectory.”
3. Strong order book:
TCS order book continued to be robust in the quarter under review. The company posted an order book of $8.2 billion. It had stellar client metrics. In Q1FY23, TCS added 9 new clients into the over $100 million band yoy, while 19 clients added to the over $50 million band.
4. Standalone earnings:
The company’s revenue from operations came in at ₹44,480 crore in Q1FY23 increasing from ₹37,722 crore in Q1FY22 and ₹42,459 crore in Q4FY22. PAT jumped to ₹8,588 crore from ₹8,281 crore in Q1FY22, however, declined from ₹9,795 crore in the preceding quarter.
5. Double-digit growth across industries:
Growth was led by Retail and CPG (25.1%), Communications & Media (+19.6%), Manufacturing vertical (+16.4%) and Technology & Services (+16.4%). BFSI grew +13.9% while Life Sciences and Healthcare grew +11.9%.
6. Geographical performance:
TCS stated that among major markets, North America led with over 19.1% growth; Continental Europe grew over 12.1% and the UK grew over 12.6%. In emerging markets, India grew over 20.8%, Asia Pacific grew over 6.2%, Latin America grew over 21.6%, and the Middle East & Africa grew 3.2%.
7. Services:
TCS said there was strong, broad-based demand across the different services, led by Cloud, Consulting & Service Integration, Cognitive Business Operations, and Enterprise Application Services. Key themes driving G&T demand in Q1 were customer experience, cloud transformation, and sustainability.
8. Employees Base:
In the quarter, TCS touched a milestone with employees’ headcount In the quarter, TCS touched a milestone with employees’ headcount crossing the 6 lakh mark. As of June 30, 2022, the company’s headcount stood at 606,331 with a net addition of 14,136 during the quarter. The workforce continues to be very diverse, comprising 153 nationalities and with women making up 35.5% of the base.
TCS gradually accelerated its return to office program in Q1, with about 20% of the workforce now working from the office. IT services attrition was 19.7% on the last twelve months basis.
9. Research and Innovation:
As of June 30, 2022, the company has applied for 6,752 patents, including 169 applied during the quarter, and has been granted 2,400 patents.
10. Dividend:
TCS declared an interim dividend of ₹8 per equity share having a face value of Re 1 each to its shareholders. TCS announced July 16 as the record date to identify eligible shareholders for the dividend payment. Following this, TCS has fixed August 3 as the date for paying the dividend to these shareholders.
