Q1FY24 Results: IT majors Tata Consultancy Services (TCS), HCL Technologies, and Wipro announced their June quarter results kickstarting the Q1FY24 earnings season. So far, the results of all three tech players have been in line with mixed-to-muted estimates by analysts and brokerage firms. However, experts say that Q1 numbers may be muted, but the trend is expected to reverse in the coming couple of quarters.
Q1FY24 Results: IT majors Tata Consultancy Services (TCS), HCL Technologies, and Wipro announced their June quarter results kickstarting the Q1FY24 earnings season. So far, the results of all three tech players have been in line with mixed-to-muted estimates by analysts and brokerage firms. However, experts say that Q1 numbers may be muted, but the trend is expected to reverse in the coming couple of quarters.
‘’Indian IT companies are able to sustain margins, and order book size is growing. Recently, the US dollar has started to weaken due to rapid moderation of US inflation, which is likely to be a benefit for Indian IT services making them competitive in the current cost-centric scenario,” said Vinod TP, Research analyst at Geojit Financial Services.
‘’Indian IT companies are able to sustain margins, and order book size is growing. Recently, the US dollar has started to weaken due to rapid moderation of US inflation, which is likely to be a benefit for Indian IT services making them competitive in the current cost-centric scenario,” said Vinod TP, Research analyst at Geojit Financial Services.
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Let’s take a comparative look at what’s working and what’s not for TCS and Wipro based upon their Q1FY24 earnings:
Net Profit
Azim Premji-backed Wipro earned a consolidated net profit of ₹2,870.1 crore in the April-June quarter, rising by 11.95 per cent compared to the year-ago period. This profitability is attributed to owners of the company. Sequentially, however, the company’s net profit was down by 6.6 per cent, compared to ₹3,074 crore in the preceding March quarter, due to decline in all major financial metrics.
TCS also reported a 16.84 per cent rise in its consolidated net profit to ₹11,074 crore, compared to ₹9,478 crore in the corresponding period last year. But on a quarter-on-quarter (QoQ) basis, the IT firm’s consolidated net profit was down 2.8 per cent, compared to ₹11,394 crore in the preceding March quarter of fiscal 2022-23 – similar to the trend shown by rival Wipro.
Revenue
TCS’s revenue from operations in the June quarter came in at ₹59,381 crore, compared to ₹52,578 crore in the year-ago period, registering a growth of 12.9 per cent year-on-year. The company’s revenue growth in constant currency terms rose 7 per cent annually. In dollar terms, the revenue grew by 4 percent as against the previous quarter to $7,226 million.
On the top-line front, Wipro posted revenue from operations to ₹22,831 crore in Q1FY24, recording a growth of 6.05 per cent from ₹21,528.6 crore in first quarter of the previous fiscal. However, the company’s revenue from operations declined 1.57 per cent sequentially from ₹23,190 reported in the preceding March quarter of fiscal 2022-23.
Attrition
TCS reported a decline in its attrition rate to 17.8 per cent for the last 12 months. The IT major’s total workforce stood at 6,15,318 as on June 30, 2023, with a net addition of 523 during the quarter. TCS gave a 12-15 per cent hike for exceptional performers in its latest annual compensation review and also commenced the promotions cycle. The company also rolled out its annual salary increase across its workforce, with effect from April 1, 2023.
Wipro stated that its voluntary attrition has continued to moderate sequentially, coming in at an eight-quarter low of 14 per cent. The firm also that employee count has gone down by 8,812 individuals in the June quarter. Wipro’s total employee count also went down from 258,570 at the end of fiscal 2022-23 to 249,758 at the end of Q1FY24.
Large deals
In Q1FY24, strong deals momentum continued for TCS as it won orders worth $10.2 billion, which was higher by two per cent QoQ and 24.4 per cent YoY. At over $10 billion, TCS said its order book for the April-June quarter was against $8.2 billion reported a year ago.
TCS hinted that clients are still focusing on cost optimisation amid macro headwinds. “Clients continue to reprioritise, preferring business critical projects and those with a faster ROI (return on investment). Cost optimisation, vendor consolidation and integrated operations are high on priorities,” TCS said.
“Enhanced flexibility, resilience, and establishment of a solid foundation continue to drive transformation initiatives. Growth was led by cloud modernisation, cyber security, IoT (internet of things) and digital engineering,” the IT major said.
Wipro secured 55 large deals with a TCV worth $3.9 billion, experiencing a remarkable YoY growth of 66.5 per cent. The company concluded the last financial year with a 28 per cent increase in its order book and hired 22,000 new employees in FY23. Additionally, it gained 435 new customers, primarily through acquisitions.
The company demonstrated strong cash conversion, with ₹110.8 billion, equivalent to 114.9 per cent of its net income. The total value of bookings exceeded $4.1 billion, showing a 29 per cent YoY growth for the quarter.
Wipro successfully closed 15 significant deals, amounting to over $1.1 billion in total contract value, marking a 155 per cent YoY growth in Q4’23.
This copy is being updated. Please check back for more updates
