TCS Q2FY24 Results : Consistent YoY growth along with strong deal wins

As Q2FY24 results have started, one of the first major companies to announce its results was the IT services giant, TCS. On a consolidated basis, the company posted YoY growth in both revenues and net profits. Another highlight of the results was the announcement of a buyback worth Rs 17,000 crore.

Revenue for the quarter ending on September 30, 2023, reached Rs 59,692 crore, with a YoY growth of 7.9%. Net profits increased by 8.7% YoY to Rs 11,342 crore. The operating margin expanded by 0.3% YoY to 24.3%.

One of the key highlights this quarter was the significant deal wins by TCS. The TCV (Total Contract Value) of $11.2 billion is the second-highest TCV ever recorded in a quarter. These deals came from the UK, Energy, Resources, Utilities, and Manufacturing sectors.

Notable deals include the BSNL project to integrate and deploy a modern 4G and 5G mobile network across India, a strategic partnership with JLR to accelerate digital transformation, Athora Netherlands to transform their closed book life business, and GE Healthcare’s Global IT function for digital transformation.

TCS reported its first decline in US Dollar revenue in over three years, spanning 13 quarters. The board of TCS approved a share buyback worth up to Rs 17,000 crore at Rs 4,150 apiece, representing a premium of 15% over the current market price. The board also authorized a second interim dividend of Rs 9 per share for the financial year.

Management Speak

K Krithivasan, CEO and MD of TCS, said: “Our clients continue to entrust us with critical new technology initiatives and large programs to digitally transform their IT and business operating models. Strong deal momentum resulted in a substantial order book in Q2, marking our second-highest TCV ever in a quarter, and we also have a healthy pipeline. The resilience of demand for our services, our clients’ willingness to commit to long-tenure programs, and their continued appetite for experimentation with Gen AI and other new technologies give us confidence in our longer-term growth prospects.”

Our View:
The results were a mixed bag of expectations from investors and analysts. Drawbacks include a decline in dollar revenue, as well as the lower value of the buyback, which was expected to be around 22,000 crores according to street estimates.

On the positive side, TCS achieved the second-highest TCV in a quarter. It’s also worth noting that TCS has consistently grown its revenues and net profits on a YoY basis for the last few years. Achieving a net profit of Rs 11,342 crore this quarter is no small feat, as it equals the market capitalization of many small-cap and mid-cap companies.

While the immediate market reaction has been negative, with the stock opening 1.5% lower on the day following its results, we anticipate that deal wins will maintain the current pace, and the stock will likely continue its upward trend for the rest of the financial year.

 

ABOUT THE AUTHOR

Ketan Sonalkar (SEBI Rgn No INA000011255 )

Ketan Sonalkar is a certified SEBI registered investment advisor and head of research at Univest. He is one of the finest financial trainers, with a track record of having trained more than 2000 people in offline and online models. He serves as a consultant advisor to leading fintech and financial data firms. He has over 15 years of working experience in the finance field. He runs Advisory Services for Direct Equities and Personal Finance Transformation.

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