TCS' net profit rises 15% in Q4 FY23, remains cautious on future demand
TCS expects near-term demand for IT services to remain muted as customers are going slow on technology spending.
Tata Consultancy Services (TCS), India’s largest IT services exporter, on Wednesday reported a net profit of Rs 11,392 crore for the fourth quarter of FY23. This is an annual growth of 14.7% even as the company remained cautious about the future outlook given the economic challenges in its key market—the US.
TCS, which is regarded as the bellwether of the Indian IT industry, reported a revenue of Rs 59,162 crore for the fourth quarter of FY23, which is a 16.9% annual growth.
CEO Rajesh Gopinathan noted that the recovery in its key North American market has not been as per expectation while the demand from other geographies like the UK and Continental Europe continues to remain strong.
“There is a near-term weakness in the North America market and we are watching it carefully,” he remarked.
The BFSI segment and the North American market remain the key constituencies for TCS. North America accounts for 52% of TCS' revenue while BFSI contribution stands at 31%.
The company observed that while there are no big cuts from the clients, it is spending wisely.
The collapse of Silicon Valley Bank and the takeover of Credit Suisse by UBS has had an overhang on the Indian IT industry. In addition, the US Federal Reserve increasing its interest rate to curb inflation has led many US companies to rethink technology spending.
“This quarter has come softer as there is cautionary talk from the clients and from an operational perspective we have been tightening,” Gopinathan said.
The expectation from the company is that it would be able to ride through the crisis and be ready once the demand starts gaining traction.
The company's operating profit margin stood at 24.5% for the quarter. It has been operating within this band for some time now though the aspiration is to take it to 26%-27%.
TCS has been able to maintain profitability even under the present economic environment largely due to tight control of its human resources cost. The company's total employee strength stood at 614,795 at the end of FY23—which was an addition of 22,600 people for the entire financial year. In comparison, during FY22, it added 1.3 lakh people.
“We have been disciplined in our capacity addition,” remarked Gopinathan.
The company noted that the total contract value at the end of the fourth quarter stood at $10 billion. It noted that the demand for IT services remained resilient despite the short-term uncertainty.
For the full year of FY23, TCS registered a revenue of Rs 2,25,458 crore and Rs 42,147 crore in net profit.
TCS, which announced a surprise leadership change last month with CEO Rajesh Gopinanthan making way for K Krithivasan, will see a faster transition. Krithivasan will now take over the role from June 1—ahead of the earlier planned date of September 15.
Edited by Kanishk Singh