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TCS revenue falls QoQ for the first time in 4 years; announces ₹17,000 crore buyback

TCS revenue falls QoQ for the first time in 4 years; announces ₹17,000 crore buyback
  • TCS announced a ₹17,000 crore buyback at a share price of ₹4,150 per share.
  • Its dollar revenues fell marginally by 0.2%, but net profits went up by 2.3% sequentially.
  • Its attrition for the quarter stood at 14.9%.

Tech major TCS disappointed the street as it reported a 0.2% sequential fall in second quarter dollar revenues on Wednesday, which suggests demand uncertainty continues to plague IT companies. The company announced a ₹17,000 crore buyback at a share price of ₹4,150 per share.

Its dollar revenues fell marginally by 0.2% to $7,210 million from $7,226 million in the first quarter of FY24. Analysts expected the company to post anywhere between 0.5-1% growth in revenues in constant currency terms.

Its net profit, however, went up 2.3% sequentially to ₹11,380 crore from ₹11,120 crore from the first quarter. The company’s orderbook stands at $11.2 billion with a book-to-bill ratio of 1.6.

“Strong deal momentum delivered us a very large order book in Q2 – our second highest TCV ever in a quarter, and a good pipeline. 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,” said K Krithivasan, CEO and MD of TCS.

The company also reported an operating margin at 24.3% for the quarter – which expanded 0.3% YoY.

“Our focus on improving employee utilization, while driving productivity improvement and cost efficiency across the organisation, has helped us expand our operating margin to 24.3%,” said Samir Seksaria, CFO of TCS.

The company announced a ₹17,000 crore buyback at a share price of ₹4,150 per share. The stock closed at ₹3,610 on Wednesday. It also announced an interim dividend of ₹9 per share.

Commenting on this, Prashanth Tapse of Mehta Equities Ltd. said, "TCS board approved buyback of ₹17,000 crore at a price of ₹4,150 per equity share against street expectations of ₹4,300 to ₹4,500 per share. The buyback price is at a premium of about 15%. The company will be buying back up to 4.09 crore shares which will be 1.12% of the total equity share capital."


Particulars

Q2 FY24

Q1FY24

% change

Net Profit

₹11,380 crore

₹11,120 crore

2.3%

Revenues

$7,210

$7,226 million

-0.2%



The company’s BFSI sector constant currency revenue de-grew by 0.5%, while life science and healthcare grew by 5% and consumer business by 1%.

The attrition for the quarter stood at 14.9%.

“The key comments to be watched out would be strategic changes under the new CEO; deal win total contract value (TCV) and nature of deals; outlook by vertical through FY24; potential margin levers through FY24; capital allocation and clarity on buyback in FY24,” said a report by IIFL Securities.

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