TCS Q4 results analyst views: Uptick in deal acquisitions, projects ramp-ups likely in Q1

Tata Consultancy Services Ltd (TCS) with its Q4 results has set the operational performance standard for the rest of the large-cap pack, said analysts who said the IT firm has demonstrated adaptability in its relationships with clients, particularly during challenging periods such as change requests and contract renewals. This capacity largely enabled by its customer-centricity is fostering flexibility, they said post TCS' Q4 results.

For the March quarter, the TCS growth was modest in an otherwise muted macro environment, said Dhruv Mudaraddi, Research Analyst at Stoxbox who expects the mega deal with Aviva to continue to yield better utilisation levels. It will be margin accretive for growth going forward until the first half of FY25, Mudaraddi said.

Biswajit Maity, Senior Principal Analyst at Gartner said TCS displayed significant momentum with a year-over-year rise in profit percentage. Maity said the core strength of TCS lies in its customer-centric approach, where it dedicates resources to nurturing deep, long-lasting client relationships.

"Despite being time-intensive, this endeavour empowers TCS to effectively engage with client C-suites. Furthermore, TCS demonstrated adaptability in its relationships with clients, particularly during challenging periods such as change requests and contract renewals. This capacity is largely enabled by its customer-centricity, which fosters flexibility, along with its streamlined account management practices. Collectively, these attributes have played a pivotal role in driving TCS's positive growth momentum. We believe that this growth momentum will continue for upcoming quarters as well," Maiti said.

Mudaraddi said the order book has seen consistent growth to record levels which sets TCS apart and we’ll continue to see this benefit its growth trajectory. The quarter completes one year for the new management and the continuity and benefits from that are now bound to show in the coming quarter extending the operational improvements that we have already seen," Mudaraddi said.

Since the IT spending budgets have been finalised by the end of March, Mudaraddi of Stoxbox expect an uptick in deal acquisitions and project ramp-ups commencing in Q1FY25, thus reinforcing TCS's optimistic outlook.

Earlier today, TCS' revenue grew 1.1 per cent sequentially and 2.5 pr cent YoY in rupee terms at Rs 61,237 crore, which was marginally below the market estimate of Rs 61,451 crore. The Q4 growth could be attributed to a strong rise in India revenue (up 37.9 per cent), a revival in the UK business (up 6.2 per cent), and the Regional markets vertical (up 9.7 per cent).

EBIT grew 5 per cent QoQ and 9.9 per cent YoY to Rs 15,918 crore, surpassing market expectations of Rs 15,544 crore. The EBIT margin expanded to 26 per cent (up 98 bps QoQ /up 151 bps YoY) owing to cost-cutting efforts and lower subcontracting costs.

Net income stood at Rs 12,240 crore, beating the market estimates of Rs 12,034 crore. The PAT margin expanded to 20.3 per cent (up 199 bps QoQ / up 97 bps YoY).

The order book for Q4FY24 stood at $13.2 billion, which was an all-time high, led by the mega deal with Aviva and other deals in the emerging markets vertical.