InvestorQ : What is your quick take on the quarterly results of TCS for Q1FY23 announced on Friday?
Debbie Mascarenhas made post

What is your quick take on the quarterly results of TCS for Q1FY23 announced on Friday?

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Arti Chavan answered.
1 month ago
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For the first quarter ended June 2022 (Q1FY23), TCS did managed to get the better of street estimates on top line revenues, but growth in profits was more constrained. Its net profits grew 5.2% on a yoy basis 2.5% on a sequential qoq basis. Net profits for Q1FY23 stood at Rs9,478 crore, around 5% short of estimates by the street. Total revenues for the quarter were up 16.2% yoy at Rs52,758 crore. However, sequential growth was just about 4.28%. Revenues were slightly better than the street estimates ahead of the announcement.

However, there was again a sharp contraction in the operating margins of TCS. For the first quarter ended June 2022 TCS announced operating margins of 23.1%, which his nearly 240 bps lower compared to the operating margins of 25.5% in June 2021 quarter. Of course, TCS does not provide guidance either on the top line or on the margins. However, what we do know is that TCS has a total contract value (TCV) of $8.2 billion, although the number of large big-ticket deals were relatively lower compared to the fourth quarter ended March.

While the CEO Rajesh Gopinathan continued to remain positive on the future outlook of the company, its biggest worry would be the level of attrition at 19.7%. This is sharply higher than the 17.4% attrition levels recorded in the sequential March 2022 quarter. TCS net headcount is above 606,000, but attrition levels would continue to worry the company as it adds a steep hidden cost to the company. OPM came under pressure due to impact of annual salary increase, high cost of managing talent churn, rising travel expenses etc.

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