TCS' margins contract 240 basis points YoY in Q1; here’s what Rajesh Gopinathan has to say

Tata Consultancy Services (TCS) on Friday reported lower-than-expected financial results for the quarter ended June 30 on account of higher employee costs. As a result, the operating profit margin of the company came at 23.10 per cent, registering a contraction of 240 basis points year on year.

The IT major reported a 5.21 per cent year-on-year (YoY) growth in consolidated net profit at Rs 9,478 crore in Q1FY23. However, the bottom line of TCS slipped declined 4.51 per cent on a quarter-on-quarter (QoQ) basis.

While commenting on the fall in operating profit margins, Rajesh Gopinathan, chief executive officer and managing director, TCS said, “This is the bottom where we do our annual wage increases and promotions. The total impact of that on our profit and loss is about 150 basis points.”

He further added that the net margin of the company came at 19 per cent and net cash from operation stood very strong at 114 per cent of total income.

Revenue from operation increased by 16.18 per cent YoY and 4.28 per cent QoQ to Rs 52,758 crore. “Our steady growth of revenue is reflected in the growth across all our customer banks. We have had steady additions across customers and our 100 million-plus customer base grew by 9 per cent YoY to 59 clients for this quarter,” Gopinathan said adding the company’s cash balance stood at around Rs 52,000 crore in Q1FY23.

As of June 30, 2022, the company has applied for 6,752 patents, including 169 applied during the quarter, and has been granted 2,400 patents. Sharing his views on research and innovations, Gopinathan said, “This continues to be a key focus for us not just from our products and platforms, but also reflecting the kind of intellectual strength that the company has across its IT solutions and research areas.”

Meanwhile, the IT Services attrition rate stood at 19.7 per cent in the June quarter. Overall, the company’s workforce stood at 6,06,331 as of June 30, a net addition of 14,136 during the quarter. “We continue to add employees to build up the capacity for our long-term growth and balance our demand. Attrition is higher on account of seasonality and it has not yet flattened,” Gopinath said.

Also Read: Westlife Development to add over 200 McDonald’s outlets: Vice Chariman Amit Jatia

Also Read: "Stunned, outraged, and deeply saddened" by Abe killing: Biden