Sustained Cloud Demand and Operational Excellence Marks TCS’ Q3

By India Education Diary Bureau Admin On Jan 14, 2024

MUMBAI : Tata Consultancy Services (BSE: 532540, NSE: TCS) reported its consolidated financial results according to Ind AS and IFRS, for the quarter ending December 31, 2023.

Highlights of the Quarter Ended December 31, 2023

Revenue at $7.28 billion, +2.9% YoY, +1.7% YoY in Constant Currency
Operating Margin at 25.0%*; an expansion of 0.5% YoY
Net Income at $1.41 billion*, +7.0%* YoY | Net Margin at 19.4%*
Net Cash from Operations at $1.36 billion ie 102% of Net Income
Diverse and inclusive workplace: Women in the workforce: 35.7% | 153 Nationalities
Investing in the workforce: 39.7 million learning hours YTD | 3.7 million competencies YTD
LTM IT Services attrition rate at 13.3%
Dividend per share: ₹ 27.00, including ₹ 18.00 as special dividend | Record date 19/01/2024 | Payment date 05/02/2024

K Krithivasan, Chief Executive Officer and Managing Director, said: “Our strong performance in a seasonally weak quarter buffeted by macro-economic headwinds, demonstrates the strength of our business model with a well-diversified portfolio and a customer centric strategy. We are seeing strong deal momentum across markets resulting in a solid order book providing visibility into our long-term growth. We are seeing tremendous interest in Generative AI and are leading the innovation and exploratory efforts for our customers in this area.”

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*excludes the one-time charge of $125 million towards settlement of legal claim

N Ganapathy Subramaniam, Chief Operating Officer and Executive Director, said: “The quarter saw us make significant progress in many projects of national importance, demonstrating our execution strength. Our products and platforms had a strong quarter with new wins and go-lives. The MCX platform is scaling well and processing record transaction volumes. We are on course with the BSNL 4G/5G network roll out. We are making good progress in upskilling our employees in Generative AI through our AI playground platform.”

Samir Seksaria, Chief Financial Officer, said: “Our disciplined execution and operational rigor drove strong improvement in our industry leading margins despite seasonal headwinds. We are making the right investments in our people, innovation and infrastructure to differentiate ourselves and create long term value for all our stakeholders.”

Milind Lakkad, Chief HR Officer, said: “The vibrancy and energy levels in our offices are increasing as more and more of our employees are back in the offices. We expect to be back to our normal operating mode by the end of the current fiscal year. Parallelly, attrition is trending down and at 13.3%, is now in our range of comfort. We are committed to hiring from college campuses and growing talent organically. We have commenced our campus hiring process for the next year and see tremendous excitement among freshers to join TCS.”

Q3 Segment Highlights**

Industries: Growth was led by the Energy, Resources and Utilities vertical which grew 11.8%, Manufacturing which grew 7.0% and Life Sciences and Healthcare which grew 3.1%. The Consumer Business Group (CBG) grew -0.3%, BFSI grew -3.0%, Communications & Media grew -4.9% and Technology & Services grew -5.0%. Regional Markets grew 19.2%.

Markets: Among major markets, the United Kingdom led with 8.1% growth; Continental Europe grew 0.5% and North America grew -3.0%. In emerging markets, India led with 23.4% growth, Middle East & Africa grew 16.0%, Latin America grew 13.2%, and Asia Pacific grew 3.9%.

Services: Clients continue to prioritize investments that accelerate cost reduction, drive business agility and improve resiliency across the supply chain. TCS is helping clients realize business benefits with its significant investments in talent development, proprietary solutions and expanding alliances and partnerships.

AI.Cloud, Cyber Security and Cognitive Business Operations led the growth amongst service lines.

We continued to see broad based global awards/recognitions for our service offerings across Service Lines, including the Global System Integrator (GSI) Partner of the Year – Global, from AWS.

AI.Cloud: During this quarter, we saw significant demand for migration, modernization, and business transformation opportunities on cloud platforms. We also saw increased demand for data on cloud with enterprises seeking to harness the capabilities offered by both cloud and Gen AI. The demand for Gen AI is being driven by “Assist” and “Augment” use cases addressing the need to augment operations and personalize experiences across all industry segments. This quarter we launched our AI Experience Academy to provide Innovation and experimentation opportunities to TCS associates on multiple Gen AI technologies. We continue to deepen our partnerships with the hyperscalers as well as other important AI technology players.
Cyber Security: This quarter saw strong growth in our services across industry verticals. Clients continued to focus on identity and access management, security operations, cloud, and data security engagements. We are also seeing good traction for our services in Post Quantum Cryptography and Cloud Investigation & Response Automation.
Cognitive Business Operations: The quarter saw good traction in deals led by Cognix™-powered digital transformation across business and IT infrastructure operations, including workplace transformation and end-to-end IT infrastructure services. There is sustained demand for high-end services such as financial planning and analysis, tax, statutory reporting, strategic sourcing, and sustainable procurement. Key trends resonating with enterprises were vendor consolidation, Gen AI, and employee experience enhancement.
Enterprise Solutions: Clients expanded their investments in digital core by modernizing their ERP. They also partnered with TCS on implementing enterprise solutions for supply chain optimization, sustainability and reimagining sales and service channels. Our consulting led transformation approach, along with industry pre-configured solutions and innovations including TCS Crystallus™, are enabling clients to accelerate their growth and transformation journeys. We also continue to invest and strengthen our joint go-to-market approach with alliance partners.
IoT & Digital Engineering: During the quarter, we saw good traction with clients in Manufacturing, CMI, CBG, and ERU. Clients chose our offerings to improve customer experience on OTT platforms, enhance performance and resiliency of 5G networks, build autonomous vehicle programs and invest in Industry 4.0. TCS is also helping clients re-shore manufacturing operations to address supply chain-related concerns.
TCS Interactive: Enterprises are partnering with TCS Interactive to drive their digital experience, design, and transformation strategy including innovation portfolios, product concepts, product and experience design, design for delivery, and product engineering and service deployment. Our sustained focus in bringing advanced offerings to drive significant value for clients has also helped TCS win digital agency-type of engagements.

** Year on Year Growth in Constant Currency terms

Key Highlights

A leading UK Bank selected TCS as its strategic partner for the end-to-end transformation of its motor finance and leasing business. TCS will deliver a modern mobility platform by combining its advisory and transformation expertise and provide a reimagined customer experience leveraging its Interactive studio. TCS will also modernise the entire data and technology estate and optimise the operations division, bringing in efficiency.
ASX, Australia’s primary securities exchange selected TCS to provide a next generation clearing and settlement platform to service the Australian market. TCS will leverage its flagship product TCS BaNCS for Market Infrastructure to enable the transformation, replacing ASX’s existing platform for cash equities clearing and settlement.
Chosen by a global manufacturing company, to provide design engineering, supply chain and logistic services. TCS will also develop a digital assistant leveraging Gen AI, which will leverage concise information from the manufacturer’s repository of maintenance information and provide solutions for unique scenarios in their shop floor operations.
Partnered with The Munch Museum in Oslo, to create immersive and interactive drawing experiences for local visitors and global audiences. Scientists from TCS Research will leverage their expertise in AI and Machine Learning to bring Edvard Munch’s artworks and creative process to life through the power of digital innovation. TCS will also provide IT consultancy, collaborative workshops, and talent exchanges to help create immersive museum experiences that showcase the future of art.
Selected by a US based healthcare company to reimagine its current operating model, by modernizing enterprise technology and leveraging cloud. The partnership will focus on an increase in adoption of service reliability engineering across the organization at scale.
Selected by a leading European postal organisation, to transform their mission critical E-commerce and Cross Border Solutions. TCS will leverage its collaborative PacePort™ innovation hub, deep domain knowledge and technology expertise to jointly design state-of-the-art digital solutions for consumers, partners and staff.
TPG Telecom, Australia’s leading telecommunications company, has selected TCS as a strategic technology transformation partner. TCS will closely collaborate with TPG Telecom as a prime system integrator and technology partner to simplify and streamline internal systems and platforms, enhance customer journeys and products, and increase digitisation. This will help TPG Telecom become Australia’s best digital telco by delivering great value connectivity services to end customers.
Selected by Virgin Media O2 UK as the key transformation partner to create a modernized and future-ready digital workplace. As part of the long-term partnership, TCS will create a new solution that involves significant automation and self-help and will offer a unified and superior employee experience.
Selected by a leading European insurance provider, with presence in 200+countries, to reimagine their IT operating model. As part of this multi-year partnership, TCS will provide end-to-end enterprise IT application services by leveraging its global delivery framework and its proprietary solution including ignio™ AIOps from the Digitate suite of offerings. TCS will also set up a global command centre to drive operational resilience and business agility.
A large German automotive financial services company has selected TCS to provide a comprehensive portfolio of SAP IT services. The client has embarked on a multi-year SAP S/4 HANA Transformation along with other initiatives to digitally transform their SAP Landscape. As a strategic partner, TCS will help the client build a new future-ready digital core powered by SAP S4/HANA, enabling simplification of the business operations and elevating user experience across all value chains.