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Credit rating agency <keyword id="125045" type="General" weightage="50" keywordseo="fitch-ratings" source="Orion">Fitch Ratings</keyword> on Thursday said <keyword id="1417402" type="General" weightage="50" keywordseo="tata-consultancy-services-limited" source="Orion">Tata Consultancy Services Limited</keyword>'s (<keyword id="6357150" type="General" weightage="80" keywordseo="tcs" source="Orion">TCS</keyword>) revenue growth is likely to slow in the financial year ending March 2024 (FY24) amid the global economic slowdown, after strong 3QFY23 results. TCS reported 19 per cent year-on-year (yoy) revenue growth in 3QFY23 and 50bp quarter-on-quarter (qoq) expansion in the EBITDA margin, reflecting continued growth and the company's ability to pass on higher costs to customers, <keyword id="82981" type="General" weightage="100" keywordseo="fitch" source="Orion">Fitch</keyword> said. Fitch expects TCS's revenue growth to slow to 11 per cent - 12 per cent in FY24 (FY23F: 18 per cent), as Fitch's December 2022 <keyword id="503893" type="General" weightage="20" keywordseo="global-economic-outlook" source="Orion">Global Economic Outlook</keyword> forecasts US GDP growth to decline to 0.2 per cent in 2023 (2022F: 1.9 per cent) and eurozone GDP growth to decline to 0.2 per cent (2022F: 3.3 per cent), the rating agency said. "We expect a relatively short recession in the US in 2Q23 and 3Q23 but the recovery is unlikely to be rapid with GDP growth still subdued at 1.6 per cent in 2024. We forecast that the Eurozone qoq GDP growth will be negative in 1Q23 before turning positive in the second quarter," Fitch said. TCS received new orders worth $7.6 billion in 3QFY23 (3QFY22: $7.6 billion, 2QFY23: $8.1 billion). The book-to-bill ratio declined to 1.07x in 3QFY23 (3QFY22: 1.17x, historical average since 1QFY19: 1.24x), suggesting some signs of impending slowdown, the credit rating agency said. According to Fitch, its adjusted EBITDA of TCS is expected to remain stable yoy at 25 per cent - 26 per cent in FY24 (FY23F: 25 per cent, 3QFY23: 25.8 per cent) as easing cost pressures are offset by a weakening demand environment. "We expect employee attrition and wage pressures to subside as the global economy slows in 2023 even though TCS's last 12 months' employee attrition remained high at 21 per cent in 3QFY23 (FY19-21 average: 10 per cent), due to the continued shortage of skilled IT labour that led to the increased talent competition," Fitch said. Fitch also expects TCS to generate pre-dividend-free cash flow of Rs 465 billion in FY24 (FY23: Rs 390 billion), which is likely to be almost entirely distributed to shareholders via dividends and share buybacks. "We expect the company to continue to keep a net cash position of more than Rs 400 billion (FY22: Rs 440 billion). We do not expect the company to undertake any major M&amp;A," Fitch added. As regards the Indian information technology sector, Fitch's outlook is stable for 2023. "We expect Indian IT services companies' revenue growth to slightly exceed global competitors' in 2023 and 2024, as customers will most likely prefer lower-cost IT vendors amid an economic downturn," Fitch said. SEE ALSO: <a target="_blank" class="c-link c-message_attachment__title_link" href="https://www.businessinsider.in/business/auto/news/sun-mobility-aims-to-serve-10-lakh-vehicles-through-its-battery-swapping-platform-by-2025/articleshow/96932578.cms">Sun Mobility aims to serve 10 lakh vehicles through its battery swapping platform by 2025</a> <a target="_blank" class="c-link c-message_attachment__title_link" href="https://www.businessinsider.in/business/news/global-pc-demand-sees-its-deepest-collapse-since-mid-90s-amid-recession-fears-gartner/articleshow/96932794.cms">Global PC demand sees its deepest collapse since mid-90s amid recession fears: Gartner</a>

TCS revenue growth to slowdown in FY24: Fitch Ratings

<ul><li><keyword id="6357150" type="General" weightage="80" keywordseo="tcs" source="Orion">TCS</keyword> announced a ₹17,000 crore buyback at a share price of ₹4,150 per share. </li><li>Its dollar revenues fell marginally by 0.2%, but net profits went up by 2.3% sequentially. </li><li>Its attrition for the quarter stood at 14.9%. </li></ul> 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." <table style="border-width: initial; border-style: none; table-layout: fixed; width: 468pt;" class="redcator-table-advance"></colgroup><tbody><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Particulars </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Q2 FY24 </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Q1FY24 </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">% change </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Net Profit </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">₹11,380 crore </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">₹11,120 crore </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">2.3% </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Revenues </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">$7,210 </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">$7,226 million </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">-0.2% </td></tr></tbody><tbody></tbody><tbody></tbody><tbody></tbody><tbody></tbody></table> 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.

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

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TCS revenue growth to slowdown in FY24: Fitch Ratings

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

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