Robust Order Book and Transformational Deals Mark TCS’ Q1

MUMBAI, July 12, 2023: Tata Consultancy Services (BSE: 532540, NSE: TCS) reported its consolidated financial results according to Ind AS and IFRS, for the quarter ending June 30, 2023.

Highlights of the Quarter Ended June 30, 2023

• Revenue at $7.226 billion, +6.6% YoY
• Constant Currency revenue growth: +7% YoY
• Operating Margin at 23.2%; an expansion of 0.1% YoY
• Net Income at $1.347 billion, +10.6% YoY | Net Margin at 18.6%
• Net Cash from Operations at $1.383 billion ie 102.5% of Net Income
• Net headcount addition of 523 |Workforce strength: 615,318
• Diverse and inclusive workplace: Women in the workforce: 35.8% | 154 Nationalities
• Building a G&T workforce: 12.7 million learning hours clocked | 1.3 million competencies acquired
• LTM IT Services attrition rate at 17.8%
• Dividend per share: ` 9.00 | Record date 20/07/2023 | Payment date 07/08/2023

K Krithivasan, Chief Executive Officer and Managing Director, said: “It is very satisfying to start the new fiscal year with a string of marquee deal wins. We remain confident in the longer-term demand for our services, driven by the emergence of newer technologies. We are investing early in building capabilities at scale on these new technologies, and in research and innovation, so we can maximize our participation in these opportunities.” 

N Ganapathy Subramaniam, Chief Operating Officer and Executive Director, said: “Our products and platforms achieved major milestones during the quarter with several transformational engagements going live. In the UK Life and Pensions administration space, we signed three new deals on our digital insurance platform, making TCS the undisputed leader in this market on any metric. We are proactively building differentiating capabilities in generative AI and actively working on such projects with our clients, delivering impact on technology, operations and client experience dimensions.”

Samir Seksaria, Chief Financial Officer, said: “We have gone ahead and rolled out our annual salary increase with effect from April 1^st. Our operating margin of 23.2% reflects the 200 bps impact of this hike, offset through improved efficiencies. At the same time, we continue to make the investments needed to power our future growth, including expansion of our delivery and research infrastructure.”

Milind Lakkad, Chief HR Officer, said: “We remain focused on developing, retaining and rewarding the best talent in the industry, and enhancing their effectiveness by bringing them back to office to foster our culture. Our Return to Office initiative is picking pace, with 53% of the workforce already in office thrice a week. We have given a 12-15% raise for exceptional performers in our latest annual compensation review, and also commenced the promotions cycle. TCSers logged 12.7 million learning hours in upskilling themselves during the quarter in market relevant skills like generative AI, cloud, data and analytics. Our attrition continues to trend down and we expect it to be back in our industry-leading, long term range in the second half of the year. While we are committed to honor all the offers we have made, our focus will be on leveraging the capacity we built last year.”

Q1 Segment Highlights**

Industries:  Growth was led by Life Sciences and Healthcare which grew 10.1% and the Manufacturing vertical which grew 9.4%. BFSI grew 3%, Retail and CPG grew 5.3%, Technology & Services grew 4.4% while Communications & Media grew 0.5%.

Markets: Among major markets, the United Kingdom led with 16.1% growth; North America grew 4.6% and Continental Europe grew 3.4%. In emerging markets, Middle East & Africa grew 15.2%, India grew 14%, Latin America grew 13.5%, and Asia Pacific grew 4.7%.

Services: Clients continue to reprioritize, preferring business critical projects and those with a faster ROI. Cost optimization, vendor consolidation and integrated operations are high on priorities.  Enhanced flexibility, resilience, and establishment of a solid foundation continue to drive transformation initiatives. Growth was led by cloud modernization, cyber security, IoT and digital engineering.

There is strong interest across industry verticals to engage with TCS to explore generative AI use cases around productivity improvement, content creation and enriching customer interactions with personalized experiences. TCS is supporting these early initiatives through its co-innovation frameworks.  

TCS’ point of view is that the full potential of generative AI is best realized through a holistic enterprise-wide initiative encompassing business, legal, risk & compliance, research and innovation, rather than by implementing multiple point solutions. It has launched an advisory offering to help customers create a holistic vision, strategy, business case and plan for enterprise-wide adoption of Generative AI.

• Consulting & Services Integration, Digital Transformation Services: Clients continued to invest in ERP cloud platforms focusing on ecommerce, customer experience, digital workplace and analytics, security operations transformation to improve effectiveness, observability and coverage, and drive design-led innovation, CX transformation and manufacturing transformation. TCS Crystallus™ has helped accelerate some of these transformation journeys and drive speed to value. Cyber Security services saw acceleration, aided by clients adopting the TCS Cyber Defense platform for their NextGen SecOps. TCS Interactive saw traction around digital marketing with real time insights, as well as digital commerce initiatives to drive digital sales and enhance customer experience. TCS Clever Energy™ continues to see good interest as clients pursue their net zero plans. In the digital engineering area, TCS continues to participate in client spending around new product development and EV charging infrastructure.
• Cloud Platform Services: Clients continue to invest in building a strong cloud foundation for business innovation. Cloud migration, data modernization and application modernization coupled with new digital technologies such as AI continue to drive growth. TCS’ investments in deepening competencies and building new capabilities have yielded good results. It is a launch partner for the hyperscalers in multiple new technology launches, including generative AI. TCS has around 148,000 employees with hyperscaler cloud certifications, one of the highest in the industry. In Q1, it won Microsoft’s 2023 Partner of the Year awards in five categories.
• Cognitive Business Operations: Clients focused on improving employee experience, transforming infrastructure operations leveraging MFDM™ and vendor consolidation. Client interest in operating model transformations led by Cognix™ continues to be very strong. Another area of strong demand was for implementing TCS’ Integrated Operations model, with AI-powered business command centers, offering business owners greater visibility and resilience across their entire operations stack.

** Year on Year Growth in Constant Currency terms

Key Highlights

• Selected by Nest, UK’s largest workplace pension scheme, to digitally transform its scheme administration services with a future-ready, digitally enabled, omnichannel platform powered by TCS BaNCS™. TCS will leverage the latest technologies and data analytics to deliver enhanced, personalized, and self-directed experiences to members. This will enable Nest’s 12 million members and 1 million employers to access the right information at the right time, in the way that suits them best.
• Awarded a 10-year contract by the UK’s Department for Education (DfE) to manage the scheme administration services and further enhance customer experiences for the Teachers’ Pension Scheme in England and Wales. TCS’ future-ready, digitally enabled, omnichannel platform, powered by TCS BaNCS™, will enable accurate administration of pension records, payment of benefits, effective scheme finance management, proactive member engagement and easy access to information.
• Engaged by Standard Life International DAC, a wholly owned subsidiary of the Phoenix Group, to transform its operating model and enhance the customer experience for its policyholders in Europe, using the TCS Digital Platform for Life and Pensions, powered by TCS BaNCS. TCS will set up a customer operations center in Germany, and a future-ready Life and Pensions Digital Platform for Germany and Austria. As part of the transformation, TCS will create comprehensive, omnichannel, journey-based digital experiences for policyholders and advisors.
• Selected by a US-based healthcare company as the strategic partner to provide end-to-end application management and end-user services across their entire value chain. TCS will leverage its deep expertise in med-tech and regulated life sciences, and MFDM™, to implement a transformative solution that will improve the user experience, efficiency, resilience and compliance.​
• Chosen by a US-based large utility services provider to re-architect their Geographic Information Systems. TCS will integrate IoT devices and enable real-time data feeds to multiple systems including transmission and distribution, asset management, wildfire protection and earthquake monitoring. This will help the client effectively plan preventive maintenance, improve agility, and enhance end-customer experience.
• Selected by a leading American multinational diesel and natural gas engine manufacturer, as the strategic partner in their sustainable products development initiative. TCS will develop electrified powertrain and green hydrogen products, and implement next gen product lifecycle management (PLM) processes & tools. This will accelerate product launch through global product design collaboration.​
• Chosen by a US-based automotive supplier as the partner to support their next-gen program for EVs. TCS will develop the software for critical electrical components which will enable aggressive launch timelines while also ensuring required safety compliance.
• Chosen by a US-based leading producer and distributor of dairy products as the strategic partner to manage security services. TCS will support the security operations center (SOC), security incident response and privilege access management by leveraging TCS Cyber Defense Suite.
• Selected by a leading North American healthcare service provider to transform three of their core areas - pharmacy care services, pharmacy benefit manager and pharmacy experience, to increase speed, create efficiencies, drive revenues, and make it the preferred pharmacy choice for clients, consumers, and providers.
• Selected by a European semiconductor manufacturer to build modern digital experience capabilities for its ecommerce business. TCS will design and develop a globally consistent purchase journey that empowers prospects and customers with various self-service capabilities and enable competitive differentiation.
• Chosen by a US-based global technology company to transform their B2C ecommerce platform. TCS will modernize their core online business portfolios worldwide in a phased manner. This will lead to improved sales, enhanced customer experience and faster go to market.
• Chosen by a US-based pharmacy benefit management and specialty managed care company as their trusted partner in a multi-year transformative journey to reimagine their patient care models. TCS will build a cloud-based and data-driven platform that will connect patients to the highest quality care. This will lead to improved clinical outcomes and better patient and care-giver experiences. 
• Selected by a large European airline group to migrate all workloads to the cloud and manage the IT infrastructure operations across its operating companies. TCS will provide end-to-end managed hybrid cloud services including multi-modal cloud operations, AIOps, FinOps and SRE. This will enable greater business agility, faster time to market and enhanced customer experience.
• DAMEN Shipyards, a leading shipbuilding, and engineering conglomerate, based out of Netherlands has extended its strategic partnership in application management services with TCS to focus across the key themes of digitalization, customer experience, operational excellence, and sustainability. As part of the engagement, TCS will drive technology transformations through intelligent automation, rapid prototyping, standardization and quality management and will enable DevOps adoption and IT modernization of its application landscape in a seamless, scalable and secure manner.
• TCS has won a comprehensive strategic managed services program from a leading technology product and platform firm. TCS will facilitate the expansion of their cloud services by effectively overseeing their partner and customer ecosystem, helping proficiently manage customer investment funds and strategically utilizing them to drive transformative initiatives across various areas, including cloud, modern workplace, security, and business applications platforms.
• TCS is selected by a large global payment processing and technology company to migrate their existing infrastructure to TCS Enterprise Cloud. TCS is responsible for data center migration, cloud infrastructure hosting and management, driven by transformation and modernization initiatives. This will bring resiliency and scalability to support their growth strategy and reduce total cost of ownership to manage their infrastructure landscape.