TCS Q2 results: Net profit rises 9%; firm announces Rs 17,000-cr share buyback, declares interim dividend

Tata Consultancy Services Ltd (TCS), the largest Indian IT services firm in terms of sales, on Wednesday reported a 8.74 per cent year-on-year (YoY) rise in net profit at Rs 11,342 crore for the September quarter compared with Rs 10,431 crore in the corresponding quarter last year. The IT major was expected to report a 9-11 per cent year-on-year (YoY) jump in net profit for the September quarter on a roughly 9 per cent rise in sales, according to estimates by brokerages.

The TCS board also approved share buyback via tender offer of up to Rs 17,000 crore at Rs 4150 per share. The firm will buy back Rs 4,09,63,855 worth equity shares, which is around 1.12 per cent of the total paid-up equity share capital.

The board also declared a second interim dividend of Rs 9 per share of Rs 1 each of the company. Record date for the purpose of interim dividend is October 19, 2023 and payment date is November 07, 2023.

Revenue in the September quarter came in at Rs 59,692 crore, up 8% YoY against Rs 55,309 crore in the corresponding quarter of the last year.

K Krithivasan, Chief Executive Officer and Managing Director of TCS said, "Our clients continue to entrust us with critical new technology initiatives, and large programs to digitally transform their IT and business operating models. Strong deal momentum delivered us a very large order book in Q2 – our second highest TCV ever in a quarter, and 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."

Revenue at TCS's mainstay banking, financial services and insurance (BFSI) segment, which generates more than a quarter of the total revenue, fell 0.5% on a constant currency basis from a year ago.

Krithivasan blamed the weakness on the uncertain macroeconomic environment.

"We are able to sign new projects. But (they are) not compensating for the degrowth happening as clients are pausing some of the projects and there are some deferrals. While the order book is strong, it is not reflecting (in) the revenue growth."

Samir Seksaria, Chief Financial Officer, said, "Our focus on improving employee utilisation, while driving productivity improvement and cost efficiency across the organization, has helped us expand our operating margin to 24.3%. We will continue to push the growth, efficiency and innovation levers to further improve our profitability. In keeping with our shareholder-friendly capital allocation policy, the Board has recommended a share buyback to the tune of Rs 17,000 crore at Rs 4,150 per share."

The earnings were announced after market hours today. Shares of TCS ended 0.52% lower at Rs 3,610.20 against the previous close of Rs 3,629.20 on BSE. Market cap of the firm stood at Rs 13.20 lakh crore.

N Ganapathy Subramaniam, Chief Operating Officer and Executive Director, said: “We continue to make
investments in our people and new technologies. We now have a 100,000-strong pool of Gen-AI Ready
consultants and prompt-engineers who are engaged in hundreds of Gen-AI projects for our clients across segments.”

He further added: “During the quarter, BSNL awarded us the project to integrate and deploy a modern,
indigenous pan-India 4G and 5G mobile network. This is a huge milestone for TCS, and we have commenced the supply, planning, design, installation and commissioning, and optimization of this mobile network, satisfying a detailed set of requirements conforming to 3GPP standards and the roll-out will be completed in about 18 months.”

Milind Lakkad, Chief HR Officer, said: “Our strategy of proactively hiring bright freshers and investing in training them with the right skills is paying off. With that talent coming on stream and with reduced attrition, we were able to recalibrate our gross additions, keeping it below the departures during the quarter, driving up productivity and enhancing project outcomes.”