Top Indian Companies: Tata Consultancy Services

Tata Consultancy Services (TCS) is an Indian multinational information technology (IT) services and consulting company headquartered in Mumbai, Maharashtra, India with its largest campus located in Chennai, Tamil Nadu, India. As of March 2021, TCS had a total of 50 subsidiary companies and operated in 46 countries. TCS is part of Nifty 50 index with a weightage of 5.11%.

Share Holdings Pattern

The Shareholding Pattern page of Tata Consultancy Services Ltd. presents the Promoter's holding, FII's holding, DII's Holding, and Share holding by general public etc.

Holder's Name No of Shares % Share Holding

No of Shares 3699051373 100%

Promoters 2670204298 72.19%

Foreign Institutions 554061955 14.98%

Banks / Mutual Funds 122919485 3.32%

Central Govt 1531354 0.04%

Others 38344007 1.04%

General Public 141572601 3.83%

Financial Institutions 170417673 4.61%

FY2023 Full Year and 4th Quarter Results

TCS reported a 14.8 per cent increase in March quarter net profit at Rs 11,392 crore but flagged worries from its key market of North America. Events like the fall of SVB and fears of a contagion have impacted client sentiments in North America and the banking, financial services and insurance sector in particular, leading to clients deferring spends.

When compared to the year-ago period, the revenues jumped 16.9 per cent to Rs 59,162 crore.

Its outgoing CEO Rajesh Gopinathan conceded that the 0.6 per cent growth in the topline over the December quarter has been "weaker than anticipated" because of the setbacks in North America.

For FY23, the company reported a 17.6 per cent growth in revenues at Rs 2.25 lakh crore while the profit after tax was 10 per cent higher at Rs 42,147 crore.

Domestic brokerage Axis Securities said the results are below its expectations while Reliance Securities said Indian IT will not be immune to worsening global macro environment having headwinds like rising inflation, economic slowdown and currency volatilities.

The company's Chief Operating Officer N Ganapathy Subramaniam said there are no big budget cuts but clients have adopted a strategy of "spending wisely" due to the impact on the sentiment, and are deferring spends.

The company reported a total contract value of USD 10 billion that includes a USD 750 million mega deal, and will maintain its guidance of having the number between USD 7-9 billion every quarter, he said. Gopinathan said the "negative" sentiment has led to a situation where discretionary spends are being put on hold by clients, and added that it is "wait and watch" in the immediate near-term for them. There have been no project cancellations and the structural story of Indian IT is intact, he added. The company has taken a lot of measures to protect its performance in North America like going down on lateral hires and limiting the sub-contracting costs.

Krithivasan, who will be taking over from June 1, said many banks are better placed now than when they were before the onset of the current episode of the crisis, and added that the ongoing events cannot be compared to the global financial crisis of 2008 post-Lehman breakdown.The company management was, however, unsure about how long the negative sentiments would continue to prevail and keep impacting the business.The company missed its 26-28 per cent operating profit margin aspiration as the key number came at 24.5 per cent for the March quarter. TCS Chief Financial Officer Samir Seksaria said the company will continue to chase the aspirational margin band even though there can be challenges like impact from salary hikes.

Milind Lakkad, the Chief Human Resources Officer, said the company is maintaining the 40,000 freshers-hire target for FY24 and has already made 46,000 offers. The salary revisions will be like usual, and the top performers will get a 12-15 per cent hike, he added. During the reporting quarter, the company turned back to its historical trend by becoming a net hirer, and added 821 employees to take the overall strength to 6.15 lakh people. Lakkad also said the company will be paying the full variable pay to its associates for the fiscal.

Subramaniam said generative artificial intelligence platforms like ChatGPT feature in every conversation with customers and the company has already started building tools on the same which are delivering revenues as well.Krithivasan said his immediate priority will be to start meeting customers and understanding the business, especially the non-BFSI piece, and will also meet a wider set of employees going forward. He also said that he is not in a hurry to initiate any structural changes in the organisation.

Shares of TCS had closed 0.87 per cent up at Rs 3,242.10 a piece on the BSE at the end of April 12, 2023, trade as against gains of 0.39 per cent on the benchmark.

ESG

TCS ESG integration helps BFSI institutions control and track ESG data across financial and investment portfolios. The solution helps identify the parameters needed to build sustainable frameworks and contributes directly to scoring methodologies to provide a transparent view of the ESG data.

Brokerage Outlook

Centrum maintain ADD rating on the stock. Despite the strong deal pipeline, TCS management indicated caution and uncertainty among clients in the near term which could further impact revenues as well as slow down margin improvement. We maintain our ADD rating on the stock and revise our revenue and profitability estimates for FY24/25E to account for lower growth as well as slower margin improvement. We continue to value TCS at 24x FY25 EPS to arrive at a target price of Rs 3,541, representing a 9% upside on the current price

See below Centrum Report for FY23 Q4