IT Companies Not Out Of Woods Yet, Says TCS

TCS' net profit increased 8.7 per cent year-on-year to Rs 11,342 crore in the September 2023 quarter

TCS shares dropped over 1 per cent on Thursday a day after the company announced its September quarter earnings.

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Tata Consultancy Services, the country's largest software exporter, has logged an 8.7 per cent increase in its September quarter net profit to Rs 11,342 crore, but made it clear that the headwinds for the IT sector continue amid a sluggish economic climate. Its revenue increased 7.9 per cent in the September quarter to Rs 59,692 crore but was up only marginally compared to Rs 59,381 crore in the preceding June quarter.

The Tata Group firm also announced a Rs 17,000-crore share buyback on top of committing a nearly Rs 3,300-crore dividend payout.

K Krithivasan, CEO and MD, TCS, said, "Yes, there is uncertainty because of which clients are focused more on optimisation, which results in the older projects getting optimised or some of them getting passed or reprioritised, resulting in muted or moderated revenue growth."

The IT firm's mainstay of banking, financial services and insurance reported a marginal dip in revenue, and so did communication and media at negative 2.1 per cent. Among the geographies, the UK led by growing at double digits, but the biggest market of North America grew by just 0.1 per cent.

Meanwhile, even as it faces choppy waters on the revenue expansion front, the company reported new deal signings of $11.2 billion, the third straight quarter of the number being over $10 billion. The company management acknowledged the strong deal flows are not getting translated into revenues.

Krithivasan said the new deal pipeline continues to be strong, but they cannot comment if all of it will get translated into signings.

Among the geographies, Krithivasan said, North America is "slightly confusing" with different sets of data inputs influencing the outlook being received, while in Europe, there are "issues" in Germany and France.

COO N Ganapathy Subramaniam said it completed two projects in the quarter, due to which there was some hit to the revenues, but was quick to add that in all the new projects, the deal ramp-ups are as per plans.

TCS shares dropped over 1 per cent on Thursday a day after the company announced its September quarter earnings.

In late morning trade, the stock dived 1.62 per cent to Rs 3,551.25 apiece on the NSE. On the BSE, TCS shares declined by 1.6 per cent to Rs 3,552.60 per piece, emerging as the biggest loser among Sensex shares.

Meanwhile, the IT services firm has announced that it has asked its 6.14 lakh-plus employees to work from offices, ending the practice of remote working that started due to the pandemic.

TCS, the first major IT services firms to announce such a move, has asked its workforce to return to offices because of the need to deepen the value systems and a belief in productivity gains coming from co-working, TCS Chief Human Resources Officer Milind Lakkad said. "We strongly believe that they need to come to work so that the new workforce gets integrated with the larger workforce of TCS. And that is the only way they will learn and understand and internalise the TCS values and the TCS way. So yes, we are asking people to come all days in a week," Lakkad said.