TCS Q1 Profit Up 8.7%, Cautious on FY25 Growth - PTI

Mumbai, Jul 11 (PTI) The country's largest IT services player TCS on Thursday reported an 8.7 per cent growth in the June quarter net profit at Rs 12,040 crore, but sounded unsure about sustaining growth momentum in the remainder of the fiscal.

The Tata Group company, however, reiterated that it feels FY25 will be better than the previous fiscal year for the business.

TCS, the first among the IT majors to report its earnings for the April-June period, posted revenue growth of 5.4 per cent to Rs 62,613 crore for the quarter, and chief executive and managing director K Krithivasan said that the company is happy with the all-round growth.

Replying to a question on whether the growth is sustainable, he said that it may be difficult to make that assertion.

"We are not going to call that out explicitly. It is too early to call whether the growth momentum is sustainable because the market conditions continue to remain the same as it was last quarter, so there is nothing new to add in terms of market sentiments," he told reporters after the announcement of the results.

From a geographical mix perspective, revenue from North America declined by 1.1 per cent leading to the share of the largest market slipping to 49.5 per cent in the pie, while the same from India grew 61.8 per cent on the back of the 4G network rollout work it is doing for state-run telco BSNL.

To a specific question on three-fourths of the incremental revenue growth coming from BSNL during the quarter, Krithivasan said while BSNL did grow well, the non-BSNL revenues had a substantial part in this growth when compared with the preceding March quarter.

"It's not a one-trick pony," Krithivasan said, pointing out that the company is "hesitant" to call out whether it will be able to sustain the growth because of the volatile market conditions and short decision-making spans of customers.

The revenue growth in the Middle East and Africa came at 8.5 per cent, while the same for Latin America was 6.3 per cent, and Krithivasan said these regional markets including India will become "material" contributors to the business going ahead.

The largest vertical of banking, financial services and insurance also saw a 0.9 per cent degrowth in revenues during the quarter, and Krithivasan said both North America and the vertical is intertwined, and once one grows, the other will also start displaying a jump.

It reported new deal wins of USD 8.3 billion in the June quarter, of which USD 4.6 billion were from North America and USD 2.7 billion came from the BFSI vertical, Krithivasan said. The new wins or total contract value was much lower when compared to both the quarter-ago period and the year-ago period, but the CEO said the company is comfortable till the quarterly figure is between USD 7-9 billion.

The company's operating profit margin narrowed to 24.7 per cent, largely because of the impact of wage hikes, and its chief operating officer Samir Seksaria said it is hoping on betting on operational efficiencies and revenue growth to take the number higher as the fiscal progresses.

He added that 26-28 per cent continues to remain the aspirational number for the company, but declined to specify if it will be able to exit FY25 in that band.

The CFO classified the situation on pricing as "stable" at the overall level.

On the headcount front, the company added employees at a net level for the first time in multiple quarters, with the overall strength going up by 5,452 to nearly 6.07 lakh professionals.

Its human resources chief Milind Lakkad said it welcomed 11,000 trainees during the quarter, some of which were spillover from the last fiscal which had seen delays in onboarding.

On the upcoming generative artificial intelligence front, Krithivasan said the overall opportunities being chased or the pipeline of deals has doubled to USD 1.5 billion, but added that most of the work is short term in nature not exceeding one or two quarters.

From an India market perspective, Krithivasan said it is looking to rollout the network for BSNL by end of the fiscal as per commitments. Amid a national furore over integrity of entrance exams for courses, Krithiavsan said the company helps conduct computer-based exams and sees an opportunity in the computer-based exams.

He said in the UK, which accounts for nearly 17 per cent of the revenues, the newly installed Labour government's roadmap will offer clarity on the business prospects going ahead.

The company also announced a Rs 10 per equity share interim dividend on Thursday and kept August 5 as the record date for the same.

Reacting to the results, analysts at the domestic brokerage Stoxbox said the numbers are a "mild surprise" on the upside, and added that they will monitor BSNL deal ramp-up, demand trends for the industry in the medium term and deal wins going forward.

TCS shares closed 0.33 per cent up at Rs 3,922.70 apiece on the BSE on Thursday against a marginal correction on the benchmark.