Tata Consultancy Services (TCS), India’s premier IT services provider, recently announced its quarterly results, revealing a less-than-stellar performance in revenue growth. The report underscores the challenges in a market marked by client hesitancy in discretionary spending, notably against the backdrop of an uncertain economic environment.
Based on figures from LSEG, TCS saw its combined quarterly revenue increase 7.9% to 596.92 billion rupees, ending in September. Nonetheless, this number didn’t meet the average forecasts of analysts, which stood at 602.44 billion rupees. TCS’s chief executive, K Krithivasan, ascribed the deficit to current economic factors, commenting, “New projects are coming in, but they’re not offsetting the decline we’re seeing because clients are putting some initiatives on hold or delaying them.
Another area of concern was the company’s Banking, Financial Services, and Insurance (BFSI) segment. Traditionally accounting for over a quarter of the company’s total revenue, this sector saw a decline of 0.5% on a constant currency basis. This unexpected dip has been particularly surprising given that the BFSI segment has long been viewed as a stable source of income for TCS.
Despite the revenue shortfalls, the company’s order book displayed a contrasting image. The order book for the third quarter stood at $11.2 billion, which marks an increase from last year’s $8.1 billion. This paints a complicated picture of the financial health of the company, with a strong order book not translating to immediate revenue growth.
On the brighter side, TCS did manage to exceed profit expectations. Net earnings surged 8.7% to 113.42 billion rupees, narrowly surpassing the average analyst projection of 113.17 billion rupees. This increase in profits is attributed to effective cost optimization, as indicated by the operating margins rising to 24.3% from 24% the previous year.
The company also noted a reduction in its workforce by 6,333 employees during the quarter, likely a strategic move to control attrition rates and better utilize existing resources. Additionally, TCS announced a share buyback plan worth 170 billion Indian rupees (about $2.04 billion), possibly aiming to boost shareholder confidence in the wake of these mixed financial results.