Amid Predictions of a Dip in Growth, TCS Optimistic About this Fiscal Year

Birender Singh

Birender Singh

The IT sector, a $220 billion industry, will see a 12-13% growth, a slump of around 6 per cent in 2023 as compared to last financial year’s 19%, predicted rating agency Crisil.

But it stated that the fall in rupee value and the growth in segments like the Internet of Things, Artificial Intelligence, and machine learning would help the sector cover some of the shortfalls. This will be the steepest fall over the last eight years as corporations face inflationary pressures in the United States and Europe, which constitute nearly 85% of the overall revenues generated by the sector.

Despite this negative forecast, Tata Consultancy Services (TCS) is predicting healthy growth over the next three quarters of the present financial year. Announcing the results on July 8, 2022, the company reported a consolidated net profit of INR 9,478 crore for the June 2022 quarter, an increase of 5.2% year-on-year. The revenues grew from INR 45,411 crore to INR 52,758 crore, which is a jump of 16.2%.

During the quarter, the company added 14,136 employees to its workforce of 6,06,331 as of June 31, 2022. The attrition rate stood at 19.7% in the June quarter compared to 17.4% in the previous quarter.

What does TCS have up its Sleeve?

Despite the general prediction of slowing down of growth rate, TCS painted a brighter picture. CEO and MD of TCS Rajesh Gopinathan said that the company is starting the financial year 2023 on a positive note with strong overall growth and deal finalization across segments.

He said that pipeline velocity and deal closures continue to be strong, but the company will remain vigilant because of uncertainties at the macro level. “Looking ahead, we remain confident of the resilience of technology spending and secular tailwinds driving our growth,” he said.

TCS’ Chief Financial Officer Samir Seksaria said that the June quarter was a challenge regarding cost management. The company’s operating margin of 23.1% is because of elevated spending on annual salary hikes, expenditure due to travel that is returning to normal after the pandemic years and the cost of churn in the workforce. But, he said, the long-term cost structures and relative competitiveness remain unchanged, and the company is well positioned to continue on the profitable growth trajectory.

It revealed that the demand for technology is high, and the growth will be in transition to the cloud and consumer experience. The company has projected to grow across customers and markets. It has signed deals worth $9.4 billion this quarter, with a couple worth over $400 million.

It has generated revenues of $6.8 billion, growing at 16.2% in rupee terms, 15.5% in constant currency and 10.2% in dollar terms year-on-year.

But the company’s India business is not doing all that well, with Gopinathan saying that they are going slow and selective about their projects, considering the overall volatility in the local market. The company clocked a growth of 19.1% year-on-year in North America, which is one of its biggest markets. Gopinathan said that they are earning $3.6 billion on a quarterly basis in the region.