TCS Q2 Results: Revenue growth falls short of Street estimates, margin up 110 bps; board approves Rs 17,000-crore buyback, Rs 9 dividend

Tata Consultancy Services (TCS)—the country's largest IT company—reported a 2.4 per cent sequential increase in consolidated net profit to Rs 11,342 crore for the quarter ended September 30, kicking off the corporate earnings season for India Inc. The Tata group IT major's board approved a buyback worth Rs 17,000 crore as well as a dividend of Rs 9 per share. 

The Mumbai-based IT company registered 0.5 per cent growth in revenue to Rs 59,692 crore for the three-month period. While the top-line was almost in line, the bottom-line fell clearly short of Street expectations. 

According to Zee Business research, the software exporter was estimated to post a net profit of Rs 11,350 crore and revenue of Rs 60,200 crore for the second quarter of the current financial year.

In dollar terms, the company's revenue came in at $7,210 million as against $7,226 million the previous quarter—the first sequential dip in 13 quarters, missing the analysts' estimate of $7,295 million. 

#TCS ने पेश किए Q2 नतीजे

₹9/शेयर दूसरे अंतरिम #Dividend का ऐलान

₹4150/शेयर के भाव पर बायबैक को मंजूरी

कंपनी बायबैक पर ₹17,000 Cr खर्च करेगी

कंपनी 4.09 करोड़ शेयरों का बायबैक करेगी

टेंडर रूट के जरिए शेयरों का बायबैक होगा

#Q2Earnings pic.twitter.com/ENWaC1kJUv

— Zee Business (@ZeeBusiness) October 11, 2023

TCS said revenue in constant currency terms grew 2.8 per cent on a year-on-year basis. Here's how its various segments fared in terms of revenue:

Revenue from the company's banking, financial services and insurance (BFSI) segment increased 0.8 per cent to Rs 22,840 crore. The unit accounted for 38 per cent of the IT firm's total revenue. 

The company's earnings before interest and taxes (EBIT)—a gauge of a business's operating performance—came in at Rs 14,483 crore for the quarter under review, marking a rise of 5.3 per cent compared with the previous three months, according to a regulatory filing. Zee Business analysts had estimated the IT firm's EBIT at Rs 14,500 crore. 

Tata Consultancy Services' margin—a measure of profitability—improved by 110 basis points (bps) to 24.3 per cent, better than the analysts' estimate by 20 bps.  

The IT company's board approved a proposal to buy back 4.1 crore shares, representing 1.12 per cent of its paid-up equity, for up to Rs 17,000 crore through the tender route at Rs 4,150 apiece—a premium of 15 per cent over the current market price. Read more on TCS buyback

“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," said K Krithivasan, CEO and Managing Director, TCS. 

The Tata group firm's order book stood at $11.2 billion for the quarter under review, remaining above the $10 billion mark for the third quarter in a row.

"The resilience of demand for our services, our clients’ willingness to commit to long tenure programs and their continued appetite for experimentation with Gen AI and other new technologies give us confidence in our longer-term growth prospects,” Krithivasan added. 

The #TCSQ2 FY 2023-24 results are out and here's what our leaders have to say. #BuildingOnBelief

Download the Press Release:

USD: https://t.co/rhNeeO1ZN4

INR: https://t.co/l90JZoUVgo

— Tata Consultancy Services (@TCS) October 11, 2023

The company's IT services attrition rate eased to 14.9 per cent on a trailing 12 months (TTM) basis, from 17.8 per cent at the end of the previous quarter. Its total workforce stood at 6,08,985 on September 30.

“Our focus on improving employee utilisation, while driving productivity improvement and cost efficiency across the organisation, has helped us expand our operating margin... We will continue to push the growth, efficiency and innovation levers to further improve our profitability," said Samir Seksaria, CFO, TCS.  

The board approved an interim dividend of Rs 9 per share (a 900 per cent payout at the face value of Re 1) with a record date of October 19 and a payment date of November 7. Read more on TCS dividend

TCS shares finished the day weaker by Rs 19, or 0.5 per cent, at Rs 3,610.2 apiece on BSE ahead of the announcements.

The Tata group stock finished the September quarter with a gain of seven per cent, sharply outperforming a 2.3 per cent rise in the headline Nifty index. 

Catch highlights of TCS Q2 results here