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TCS Q3 results | Here are the key takeaways –

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Tata Consultancy Services Ltd (TCS) delivered yet another quarter of stellar performance driven by broad-based growth across verticals and geographies, new client additions, strong deal pipeline and the continued shift of organisations the world over towards cloud transformation.

India’s largest IT services company and the second most valuable firm in terms of market capitalisation on January 12 reported a 12.3 percent year-on-year (YoY) growth in consolidated net profit to Rs 9,769 crore for the quarter. The sequential growth in net profit was recorded at 1.5 percent.

It also reported a 16.4 percent on-year growth in consolidated revenue to Rs 48,885 crore. On a sequential basis, its consolidated revenues increased by 4.3 percent.

Managing Director and Chief Executive Officer Rajesh Gopinathan was upbeat about the company’s performance which is backed by strong customer relationships. He said, “Customers love our engagement model, our end-to-end capability, and our can-do approach to problem solving”.

He added further that “while mapping out their innovation and growth journeys, we are also helping them execute new-age operating model transformations to support those journeys”.

Here are the key takeaways from the IT giant’s performance in this quarter:

Broad-based growth

TCS witnessed a strong broad-based growth across all business verticals and geographies. All its verticals grew in mid-to-high teens during the quarter.

The company achieved a significant milestone by clocking revenues of USD 25 billion on a calendar year basis in CY2021. This was a result of very strong growth over the previous four quarters.

This quarter, the company witnessed the strongest growth in Q3 in the last five years. Constant currency revenue growth for the company stood at 15.4 percent on a yearly basis and 4 percent on a sequential basis.

Strong momentum continues in new deal TCVs

The company registered new deal TCVs (total contract value) of USD 7.6 billion during the quarter. This is a growth of 12 percent from USD 6.8 billion TCV signed during the corresponding period of last year.

The management said that the company continues to witness strong momentum for cloud adoption with customers embarking on multi-horizon cloud transformation journeys, thereby enabling its hyper-scale business units to outperform consistently.

Improved Client Matrix

TCS added 10 new clients in the USD 100 million-plus bracket, taking the total number of such clients to 58. It added 21 clients in USD 50 million bracket, thereby taking the total to 118 from 97. As many as 98 new clients were added in the USD 1million plus bracket.

These client additions are representative of strong demand momentum and how customers have rewarded TCS with more business across quarters, said Gopinathan.

Hiring continues in top gear with diversity in focus

The industry as a whole continues to face supply-side challenges. The company was able to restrict its attrition rate at 15.3 percent which is much lower than its industry peers. The management sees the attrition bottoming out in the coming quarters which will also result in optimisation of margins going forward.

The net additions during the quarter stood at 28,238 associated which was the highest ever added till date in a single quarter.

In the first half of the current financial year, TCS hired 43,000 freshers. It had given a guidance of hiring another 34,000 freshers during the second half. This target has already been achieved in the third quarter and the company expects further additions of campus recruits to its workforce in the fourth quarter.

To retain the in-house talent, the company has handed out 110,000 promotions so far this year and it plans to promote additional 40,000 resources in Q4.

Chief Human Resource Officer Milind Lakkad commented: “By continuing to invest in our people, giving preference to internal candidates for the most exciting open positions, providing global deployment opportunities, fast track career paths linked to learning, and promotions to over 110,000 employees, we have been able to retain our best talent and overcome supply-side challenges”.

The company crossed an important milestone of 200,000 women associates with 200,271 women employees at the end of the quarter. This means that women now constitute 36 percent of its workforce. The number of women executives at senior levels increased by 68 percent during the five year period from 2016-21.

Expectations from stock

The broad-based growth achieved during the quarter and the continuation of growth momentum in coming quarters which is backed by a robust deal pipeline are strong positives for TCS stock.

Moreover, the company has announced a massive buyback of Rs 18,000 crore at a price of Rs 4,500 per share. The quantum of buyback is much more than street’s expectations. The buyback rate is at a premium of approximately 16.7 percent over the last traded price which is also over and above street’s expectations.

Based on the results outcome and the buyback premium, experts expect the stock to react positively tomorrow. Overall they are optimistic about the stock with medium to long term horizon.