TCS Q2 FY23: $8.1 bln order book, sequential revenue growth of 1.43 percent, attrition at 21.5 percent

Tata Consultancy Services reported quarterly earnings yesterday that show India’s biggest IT services company is still seeing strong demand for its services with an order book of more than $8 billion garnered during its fiscal second quarter. The rate of growth, however, seems to have moderated, with the more than 600,000-strong company growing at less than half the pace at which it grew last year from one quarter to the next. Shares were little changed in early Mumbai trading. Notes: Tata Consultancy Services reported quarterly earnings yesterday that show India’s biggest IT services company is still seeing strong demand for its services with an order book of more than $8 billion garnered during its fiscal second quarter. The rate of growth, however, seems to have moderated, with the more than 600,000-strong company growing at less than half the pace at which it grew last year, from one quarter to the next. Shares were little changed in early Mumbai trading. TCS reported its fiscal second quarter revenues rose to $6.877 billion for the three months ended Sep. 30, which is a 1.43 percent increase over the April-June period, missing estimates at some top brokerages in Mumbai. Analysts at ICICI Securities were expecting a 1.5 percent increase for TCS, while those at Kotak Securities had projected a 2.5-3.5 percent sequential increase for India’s top IT companies. In Q1, TCS had sequential growth of 1.25 percent, the lowest in at least six quarters. In comparison, the Mumbai headquartered crown jewel of the Tata Group grew revenues at an average quarter-on-quarter rate of 2.8 percent in the fiscal year that ended March 31, 2022. Demand for cloud services which had shot up last year, following the Covid pandemic, could now be growing at a slightly slower rate as businesses around the world are returning pre-Covid ways of work, including asking employees to get back to the office. Clients are “preparing for a more challenging environment ahead,” TCS CEO and MD Rajesh Gopinathan said in a press release yesterday. Demand remains “very strong,” he said. Revenues for Q2 rose 15.4 percent in constant currency from the same period a year earlier. Profits for the quarter were at $1.3 billion, which was the same as for the year-ago period. Operating margins narrowed by 160 basis points to 24 percent from Q2 of FY22. During the quarter, TCS booked orders worth more than $8 billion, which is the same as the value of contracts won in Q2 last year. Some of the contracts it won came from customers such as Sainsbury’s, Catalent, PostNord, Bane Nor, Northern Powergrid, Prorail, Tap Air Portugal, and Boots. The company added close to 10,000 recruits to end the September quarter with 616,171 employees. In comparison, the company added close to 20,000 recruits during the same quarter last year. Attrition, or staff churn, was at 21.5 percent at the end of Q2 on a 12-months basis, compared with 11.9 percent a year earlier. “Attrition has peaked in Q2, and we should see it taper down from this point, while compensation expectations of experienced professionals moderate,” Milind Lakkad, TCS’s chief human resources officer, said in the press release. Theme music courtesy Free Music & Sounds: https://soundcloud.com/freemusicandsounds