Tata Consultancy Services (TCS) is an Indian multinational information technology (IT) services and consulting company with its headquarters in Mumbai. It is a part of the Tata Group and operates in 150 locations across 46 countries. In July 2022, the total headcount was reported to be over 600,000 employees worldwide.

Tata Consultancy Services is the flagship company and a part of Tata group. It is an IT services, consulting and business solutions organization that has been partnering with many of the world’s largest businesses in their transformation journeys for over 50 years. TCS offers a consulting-led, cognitive powered, integrated portfolio of business, technology and engineering services and solutions.

TCS is the second largest Indian company by market capitalisation and is among the most valuable IT service brands worldwide. In 2015, TCS was ranked 64th overall in the Forbes “World’s Most Innovative Companies” ranking, making it one of the highest-ranked IT services companies and a top Indian company. As of 2018, it is ranked eleventh on the Fortune India 500 list. In September 2021, TCS recorded a market capitalisation of US$200 billion, making it the first Indian IT tech company to achieve this milestone.

Quarterly Growth Walkthrough

TCS reported a conservative performance in the weak seasonal quarter but an enhancement in operating margin and the board’s dissertation displays certain faith. The earnings report and the ensuing conference with the management have given plenty of clear and stealthy indications about a softer FY24, although the medium- to long-term outlook remains positive.

Particulars	Dec 2022	Sep 2022	Dec 2021	QoQ	YoY
Revenues	58,229	55,309	48,885	5%	19%
Operating Margin	15,553	14,516	13,433	7%	16%
Net Profit	10,883	10,465	9,806	4%	11%
EPS	29.64	28.51	26.41	4%	12%

TCS reported an 11 percent growth in its consolidated net profit at Rs 10,883 crore for the quarter ended December 2022. The company had reported a profit of Rs 9,806 crore in the same period in the previous year. The consolidated revenue from operations was reported at Rs 58,229 crore, which is up by a brilliant 19.11 percent versus Rs 48,885 crore in the corresponding quarter of the previous fiscal year.

TCS reported a revenue of $7,075 million in Q3 FY23 which is a sequential growth of 2.9 percent in reported currency and 2.2 percent in constant currency. The reported performance for the quarter was beyond the expectations. In resonance with the management, the growth was supported by cloud services, market share gains through vendor consolidation, and persistent pace in North America and the UK. The year-on-year growth in constant currency was 13.5 percent.

All the seven industry verticals have expressed constructive YoY growth with an enthusiastic exhibition by the retail group brought in by the travel and hospitality segment as well as the life sciences segment.

Global scenario

The company management scrutinized challenges in Europe where the pursuing geopolitical tension resulting into an energy crisis is building impediment in decision making and requires heightened vigilance. About 16 percent of the revenue was extracted through Europe.

TCS views assurance regarding the US which has been highly pliant. However, the short-term drag, due to the conflict against inflation seems notorious. There has been a slight decline in order flows from North America.

The UK continues its pursuit of technology expenditure with a steady momentum.

TCS has won multiple deals steadily with the deal total contract value (TCV) persisting within the range of $7-9 billion. However, Q3 deal TCV of $7.8 billion was lower sequentially but it was fairly higher YoY. The deal flow in for the first three quarters of FY23 was a mere 3 percent higher YoY and the book-to-bill ratio has fallen to 1.1x.

Favourable attributes

The client matrix continues its nourishing trait with the company acquiring clients with a net addition in $1-mn/$10-mn/$20-mn buckets. The relative position of TCS has not degenerated in the thick of a trifling and exigent operating environment.

The good news from the IT sector in general along with TCS in particular is that attrition is declining, labour market is cooling off, and wage pressure would fall, thus improving margin. Although the reported attrition figure for TCS at 21.3 percent was modestly lower compared to previous quarter’s 21.5 percent, it evokes a 6 percent decline in quarterly annualised attrition. The negative headcount addition of 2377 was a minor shock amidst the declining attrition. However, this summation arises past two years of strong hiring. The net hiring is expected to be fair in Q4 and might drift back to the pre-Covid levels from FY24.

Announcement of Dividend

TCS has announced a dividend of Rs 75 per share which includes Rs 67 as a special dividend. The record date for dividends is 17^th January 2023 and the payment date is 3^rd February 2023.

Technical Analysis

TCS stock price has taken heavy support at the 38.2% retracement level which marks it as a good entry point or to accumulate additional quantities of the shares. The price is slightly above the 200-day moving average and the MFI is at 61 points. The price faces heavy resistance at the 23.6% retracement level which might be a distribution zone for the short-term, we can see highs around the price of Rs 3400 which is a turning point for the upside.

Considering all the positives and negatives, TCS will persevere through the current unfavourable scenario with the support of the persistent spending on technology with an inclination for cost-reduction projects. Patient investors with a long-term perspective may accumulate the stock at the level around Rs 3000. However, a deeper correction to the retracement levels of 50% or 61.8% is quite possible in the worst-case scenario.

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