TCS revenue crosses Rs 50,000 crore; sees record order book in Q4

Tata Consultancy Services (TCS) beat Street estimates as the information technology (IT) major reported its highest-ever order book and crossed the revenue milestone of Rs 50,000 crore in a quarter, besides logging the highest incremental revenue addition of $3.5 billion in a year.

“We have had a strong Q4 and we are ending the year on a strong note, especially for a year that has been marked by a steady recovery. Even beyond the financial metrics, every other parameter is looking good,” said Rajesh Gopinathan, CEO and MD, TCS.

TCS reported a net profit of Rs 9,926 crore in Q4FY22, up 7.4 per cent year on year and 1.6 per cent sequentially. Revenue for the quarter grew 14.3 per cent to Rs 50,591 crore in constant currency terms.

TCS’ top line numbers surpass estimates of Bloomberg. According to a Bloomberg poll, analysts were estimating Q4 revenue at Rs 50,356.2 crore.

The highlight of the quarter was an order book of $11.3 billion, an all-time high, which also had the inclusion of two large $1 billion deals. For the full year, the order book was at $34.6 billion. On large deals, Gopinathan said that while such deals were around, it was the closure of these deals that was taking time. “It is very difficult to predict but the biggest takeaway from TCV point of view is that we were earlier in the range of $7-$8 billion, but over the last few quarters the sustainable range of TCVs would be $8-8.5 billion,” he added.

“TCS reported a strong performance in 4QFY22 driven by strong growth across geographies (particularly in North America) and strong deal wins. TCS is likely to be one of the key beneficiaries of medium-term uptrend in technology spending. We expect TCS to gain market share on the back of vendor consolidation and captive monetisation efforts,” said Mitul Shah, head of research, Reliance Securities.

“Management commentary is very positive on new deal wins, North American growth story and margins, while near-term supply-side issue remains a key challenge. We are positive on structural IT story and remain constructive on TCS being key beneficiary of IT upcycle,” added Shah.

For the full year, the company reported revenue of Rs 1.92 trillion, up 15.4 per cent in constant currency terms. And profits for the fiscal year came in at Rs 38,327 crore, up 14.8 per cent. The company reported the highest incremental revenue growth at $3.53 billion for the year.

In US dollar terms, revenue for the fourth quarter was at $6.69 billion, up 14.3 per cent YoY. Though growth was broad-based and across geographies and verticals, North America was the driving force.

Rather both North America and BFSI were the growth drivers for the company’s robust performance. North America grew 18.7 per cent and BFSI grew 12.9 per cent for the fiscal. The total revenue across all of financial products and services now is over $10 billion.

The company’s operating margins came in at 25.3 per cent for FY22 and 25 per cent for Q4. Margins were under pressure due to supply constraints and higher consultant costs. “Our aspirations for margins continue to be the 26-28 per cent range, but in the short term, we do see volatility. We also believe that we have enough levers to maintain in that range,” said Samir Seksaria, CFO.

Though the company managed to perform on growth numbers, attrition continued to inch up. For Q4, attrition was at 17.4 per cent. This has climbed up from 15.3 per cent in Q3 and a low of 7.2 per cent in Q4FY21.

However the company said that going ahead, it expects attrition to taper down. “We did around 100,000 campus hires in FY22, and we intend to keep the momentum going. We will begin by hiring 40,000 in the Q1 of FY23,” said N Ganapathy Subramaniam, COO and executive director, TCS.

The company also maintained that the current conflict in the Europe will not impact its operations. “We do not have any presence in the impacted geographies. We do not have first level impact. In terms of impact on Europe, we may see a slight stepping back on deals, but it is not stepping down,” said Subramaniam.