TCS reports Q1 FY23 results: Revenue grows by 15.5%, while margins take a hit

Operating margins were below the investor’s expectations.

The second-largest corporation in India and the largest IT company in India- Tata Consultancy Services (TCS) has reported Q1 FY23 results today on 8th July. The company is buzzing on Dalal Street and it is one of the early reporters of quarterly results.

For Q1 FY23, TCS reported a 15.5% constant currency growth in revenues to Rs 52,758 crore. The operating income stood at Rs 12,186 crore which improved by 5.16%. The net profit grew by 5.2% to Rs 9,478 crore.

The revenues have been in line with the expectations of the investors. However, the operating profit margin declined by about 240 basis points to 23.1% from the previous level of 25.5% in Q1 FY22. Margins were below the expectations of investors. Looking at some other key indicators, the order book stood at USD 8.2 billion as of June 2022. The company witnessed stellar client addition as it added 9 new clients to the 100 million+ band YoY, 19 clients were added to the 50 million+ band. The workforce number crossed 600,000 level to 606,331. While the demand has been pretty strong, the supply side (skilled employees) has been a concern for the IT industry as a whole. This was reflected by the rising attrition rate of TCS as it increased from 17.4% in the previous quarter to 19.7% in this quarter.

Samir Seksaria, Chief Financial Officer, said, “It has been a challenging quarter from a cost management perspective. Our Q1 operating margin of 23.1% reflects the impact of our annual salary increase, the elevated cost of managing the talent churn and gradually normalizing travel expenses. However, our longer-term cost structures and relative competitiveness remain unchanged, and position us well to continue on our profitable growth trajectory.”

The stock had closed at Rs 3,264.85, down by 0.67%. This was in anticipation of the results, as the results were announced after market hours.