TCS Q2 RESULTS 2024: PROFIT INCREASE, DIVIDEND, AND BUYBACK

TCS has kicked off the earnings season, and the results for Q2FY24 are above expectations. Let us look at the September quarter numbers in detail.

About TCS

Tata Consultancy Services (TCS) is a global IT services and consulting company headquartered in Mumbai, India. It is one of the largest IT services firms in the world, providing a wide range of services, including software development, infrastructure management, and business process outsourcing.

Crucial Parameters

• PE Ratio: 32.39
• ROE: 55.01
• EPS: 112.06
• 52-week high: Rs 3,680

TCS Share Price Movement

Earlier in the day, the TCS share price fell by 0.44% to close at Rs 3,613 per share, despite the broader market gaining over half a percent on Wednesday. In the six-month period, the TCS shares gave 11.46% returns. In the last one year, the share price has delivered over 16% returns to investors, and in the 5-year period, the return has been 88%. 

TCS Q2FY24 result details

Revenue: The company reported revenue of Rs 59,692 crore in Q2FY24, a growth of 7.6% YoY. The revenue increased by 2.8% in constant currency terms. In the previous quarter, the company reported revenue of Rs 59,381 crore, so QoQ growth has been muted. Growth was led by the Energy, Resources, and Utilities vertical, which grew 14.8%, Manufacturing which grew 5.8%, and Life Sciences and Healthcare, which grew 5%. Other industries like BFSI, Communication & Media, and Technology & Services contracted in this quarter.

Among major markets, the United Kingdom led the growth with 10.7% growth, North America grew at 0.1%, and Continental Europe grew at 1.3%. In emerging markets, Middle East & Africa grew 15.9%, India grew 3.9%, Latin America grew 13.1%, and Asia Pacific grew 4.1%.

Profit: TCS reported a net profit of Rs 11,342 crore in Q2FY24 compared to Rs 10,431 crore in Q2FY23, a growth of 9.09% year on year. Compared to the June quarter (sequentially), the profits have increased marginally from Rs 11,074 crore. 

Order Book: The company has a strong order book of $11.2 billion, which has increased from $10.2 billion from the previous quarter. TCS has a book-to-bill ratio of 1.6, which increased from 1.4 from the previous quarter. 

The book-to-bill ratio compares the value of orders received or booked during a quarter to the value of products or services actually shipped or billed during the same period. A book-to-bill ratio greater than 1 indicates that a company received more orders during the period than it billed, which generally implies a positive outlook for future revenue.

Other crucial updates: Operating Margin for the quarter stood at 24.2%, an expansion of 110 basis points sequentially. After muted margin growth, the finally has been able to improve the margins. Year-on-Year, the margins have grown by 30 basis points. The company has said that the headcount has fallen by 6333 employees in Q2FY24, and the total headcount stood at 6,08,985. LTM IT services attrition dipped further in Q2 and was at 14.9% for the last twelve months. 

Dividend: The board has approved an interim dividend of Rs 9 per share with a record date of October 19, 2023, and a payment date of November 7, 2023.

Buyback: TCS has approved a share buyback of up to Rs 17,000 crore, the buyback has been priced at Rs 4,150 per share. This will be the fifth time the company will be conducting a share buyback. Like all other previous four occasions, the upcoming buyback will be done through the tender route.

Management: "Our clients continue to entrust us with critical new technology initiatives, and large programs to digitally transform their IT and business operating models. Strong deal momentum delivered us a very large order book in Q2 – our second highest TCV ever in a quarter, and good pipeline..", CEO, TCS.

To sum up

TCS has reported its highest-ever quarterly revenue for Q2FY24. The company plans to improve employee utilization while driving productivity improvement and cost efficiency across the company. However, though the major industries have reported strong growth, a contraction in revenues across some industries could be a sign of worry for the company.

The company has been focusing on creating a pool of Gen-AI-ready consultants. As of the September quarter, they have around 1,00,00 such talent who are engaged in hundreds of Gen-AI-related projects for their clients.