Tata Consultancy Services Ltd. (TCS) has reported its financial results for the first quarter, revealing a net profit of ₹12,040 crore, which is a 3.2% decline compared to the previous quarter. This figure slightly exceeded the analysts' expectations, which had pegged the net profit at ₹11,989 crore.

Key Highlights:

• Revenue Growth: TCS recorded a 2.2% revenue growth in rupee terms compared to the March quarter, achieving a revenue of ₹62,613 crore. This surpassed the CNBC-TV18 poll estimate of ₹62,170 crore.
• US Dollar Revenue: In US Dollar terms, the revenue increased by 2.7% to $7.5 billion, which was higher than the poll estimate of $7.4 billion.
• Constant Currency Revenue: The company reported a 2.2% growth in constant currency terms, significantly above the CNBC-TV18 estimate of 1.5%.

Operational Insights:

• Deal Wins: TCS secured deals worth $8.3 billion during the quarter. Although this was lower than the $13.2 billion from the previous quarter and the $10.2 billion from the same quarter last year, it still represents a strong performance.
• EBIT Performance: Earnings Before Interest and Tax (EBIT) came in at ₹15,442 crore, exceeding the estimate of ₹15,262 crore. The EBIT margin was 24.7%, down by 130 basis points from the previous quarter’s 26%, but slightly above the CNBC-TV18 estimate of 24.5%.

Management Commentary:

TCS CEO & MD, K Krithivasan, highlighted the company’s continued expansion in client relationships and investment in emerging technologies. He mentioned the launch of a new AI-focused TCS PacePort™ in France, an IoT lab in the US, and the expansion of delivery centers in Latin America, Canada, and Europe.

CFO Samir Seksaria noted that the operational performance was robust despite the impact of the annual wage hike. He emphasized the company’s focus on investments in Research & Innovation (R&I) and talent, aiming to strengthen return ratios and create long-term value for stakeholders.

Dividend Announcement:

TCS has declared an interim dividend of ₹10 per share. The record date for this dividend is set for July 20, 2024.

Market Expert View:

Market expert Prakash Diwan commented on the results, stating that expectations were low going into TCS's earnings announcement. Despite anticipated challenges such as the annual wage hike, the results were better than expected, indicating potential for higher utilization levels in the next quarter. Diwan suggested that this could lead to a favorable trend, possibly resulting in a stock rerating and upgrades.

Conclusion:

TCS's Q1 results demonstrate solid performance with revenue growth surpassing estimates and significant deal wins. Despite the impact of wage hikes, the company has shown resilience in its operational metrics. With strategic investments and expansion plans, TCS is well-positioned for future growth, maintaining its strong market position.