TCS — earnings call

The transcript as filed. Every paragraph is addressable: its link names the page and the position it sits at in the call.

Prepared remarks

Moderator · Conference Operator

Ladies and gentlemen, good day and welcome to the TCS Earnings conference call.

As a reminder, all participant lines will be in the listen- only mode and there will be an opportunity for you to ask questions after the presentation concludes.

Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone.

Please note that this conference is being recorded.

I now hand the conference over to Ms. Nehal Shah from the Investor Relations team at TCS.

Thank you and over to you.

Nehal Shah

Thank you, operator.

Good evening and welcome everyone.

Thank you for joining us today to discuss TCS's financial results for the fourth quarter and full year financial year 2024 that ended March 31st, 2024.

This call is being webcast through our website and an archive including the transcript will be available on the site for the duration of this quarter.

The financial statements, quarterly fact sheet and press releases are also available on our website.

Our leadership team is present on this call to discuss our results.

We have with us today Mr. K Krithivasan, Chief Executive Officer and Managing Director.

K Krithivasan

Hello everyone.

Nehal Shah

Mr. N G Subramaniam, Chief Operating Officer and Executive Director.

N G Subramaniam

Good evening to you.

Nehal Shah

Mr. Samir Seksaria, Chief Financial Officer.

Samir Seksaria

Hello.

Nehal Shah

And Mr. Milind Lakkad, Chief HR Officer.

Moderator · Conference Operator

Thank you.

We have our next question from the line of Sudheer Guntupalli from Kotak Mahindra AMC.

Please go ahead.

Sudheer Guntupalli

Yes.

Hi, team.

Congratulations on a good set of numbers.

Krithi, you reported solid deal wins, and you are indicating that the demand visibility has improved over the previous three months, I think on the press meet.

On the contrary, one of our consulting heavy peers has indicated that demand situation further deteriorated over the previous three months.

Moderator · Conference Operator

Thank you.

The next question is from the line of Ankur Rudra from JPMorgan.

Please go ahead.

Ankur Rudra

Hi, thank you.

Just the first question is on the strong signing momentum you mentioned.

How are you thinking about the conversion of this into revenues over the next year or so?

And how does it set you up for FY'25, given perhaps easier comparable this time (FY24 growth not being very high).

Does it help you significantly?

K Krithivasan

Yes, we are quite comfortable on the revenue conversion of the deal that we signed in the last three, four quarters.

And the conversion rate has been at a similar rate that we used to convert in the past as well.

We've been saying in the last few quarters, the headwind has always been in those projects that we signed quite some time ago which are discretionary in nature or where the clients can slow it down or pause for some time.

Those are the ones providing the headwind.

Ankur Rudra

Will FY'25 pan out better given how FY'24 was?

K Krithivasan

Ankur, last quarter also we mentioned this.

Seeing the TCV of whatever we signed this quarter, we believe FY'25 should be better than FY'24.

Ankur Rudra

Understood.

Maybe if you can comment a bit more in terms of how do you think or where do you think clients are and where do you think the environment is in terms of spending cycle?

It's been almost, I think, two years now.

It's not slightly longer till we've seen, you know, revenue sort of decline, decline, decline, perhaps bottom out and begin to recover.

How do you feel about the spend cycle right now, especially the mix of discretionary and non-discretionary?

And also, if you can touch upon financial services and CMT verticals.

K Krithivasan

See, look at it this way, Ankur.

Clients want to do transformative work, and they want to embrace new technology.

We talked about cloud adoption, enterprise cloud modernization and also about Gen AI.

Clients want to do all of them, and clients also want to conserve costs.

These two are the drivers that make them choose the appropriate projects.

Moderator · Conference Operator

Thank you.

The next question is from the line of Kawaljeet Saluja from Kotak.

Please go ahead.

Thank you.

We have our next question from the line of Surendra Goyal from Citigroup.

Please go ahead.

Surendra Goyal

Good evening, everyone.

Krithi, I'm just trying to understand your commentary better.

You have sequential growth in Q4. You are saying that visibility has gotten better.

Deal TCV trends are good and mostly regular-sized deals.

And June and September are seasonally strong as well, based on what we have seen over the years.

So why are you not willing to call out growth in the coming quarters?

Is the leakage in the existing big business a concern enough to hold you back despite so many positives?

Any clarity would really be helpful.

K Krithivasan

Surendra, two things.

One, we have never given guidance.

Two, as I told, whatever answer I gave to Kawaljeet, like, there is an amount of

Moderator · Conference Operator

Thank you.

We have our next question from the line of Gaurav Rateria from Morgan Stanley.

Please go ahead.

Gaurav Rateria

Hi, thanks for taking my question.

Just wanted to get little bit better trends on BFSI.

You did talk about insurance vertical growing during the quarter across geographies.

If you could lay out in terms of outlook within BFSI of subsectors, what's going to grow and where the visibility is higher, where visibility is still not there, that would be very helpful.

N G Subramaniam

Hi Gaurav, this is NGS here.

I think overall our engagement with our customers in the BFSI segment has been terrific and very good partnership that led to about $4.1 billion worth of TCV during the quarter.

Insurance is doing well.

Capital markets is doing well, almost every stock market is doing well.

So, there are increasing opportunities that are coming.

But largely in putting controls, risk, and safety measures as opposed to trading systems or settlement systems because they're all working fine, they're all scaling, and they don't want to touch it, and they've invested a lot in the algo trading.

On the retail banking side, clearly payments and wealth management are two significant areas where we have customers wanting to try out new technologies.

And especially portfolio management, portfolio optimization using Gen AI to rebalance, and assist in a way that increases their own productivity and provide that agility to their end customers is something that we are seeing and identifying arbitrage opportunities on the fly.

These are all cases that people are experimenting, and there are opportunities in payments specifically and wealth management on the retail segment.

On the Market infrastructure side, there are a good number of programs in the pipeline.

As you know, we signed up the deal with ASX, Australian Stock Exchange, and we implemented one of the most complex commodity systems for MCX.

And we continue to engage with customers like London Clearing House and other firms.

Moderator · Conference Operator

Thank you.

We have our next question from the line of Kumar Rakesh from BNP Paribas.

Please go ahead.

Kumar Rakesh

Hi, good evening.

Thank you for taking my question.

My first question was for Samir.

So, we are exiting this year closer to 26% on the margin side.

So, through the next year, FY'25 through the quarters, should we expect the quarterly movement of margin similar to what we saw this year?

Or there was some difference in the trajectory which we saw, and we should build accordingly?

Samir Seksaria

I think one thing for sure is like it happens in every year.

We would take the impact of increments, the largest headwinds coming in Q1 and then we claw back on the margins as we go through the year.

And we would expect a similar trajectory to happen in FY25.

Kumar Rakesh

Got it.

And there has already been a lot of questions around the deal TCV, ACV and the revenue conversion.

Additionally, Krithi, you also

Moderator · Conference Operator

Thank you.

Ladies and gentlemen, that was the last question for today.

I now hand the conference over to the management for closing comments.

Over to you, sir.

K Krithivasan

Thank you, operator.

We are very pleased with our financial year 2024 performance, growing at 3.4% in constant currency, amidst the macro uncertainty prevailing in the major markets. • Our Q4 revenue grew 3.5% in Rupee terms and 2.2% in constant currency terms.

Deal momentum continued to be very strong in Q4, with our order book at $13.2 billion for the quarter, and $42.7 billion for the full year. • Our Q4 operating margins improved to 26%, an expansion of 100 bps sequentially.

Our net margin in Q4 stood at 20.3%. • Our LTM attrition in IT services fell further to 12.5%. • We continue to deliver resilient results, winning market share, and balancing growth with profitability. • We have an exceptional leadership team and an extremely dedicated workforce.

It has been every TCSers’ hard work during the year which fuelled our collective achievements, and I would like to thank each one of them for their contribution to the company’s success.

With that, we wrap up our call for today.

Thank you all for joining us.

Moderator · Conference Operator

Thank you, members of the management.

On behalf of TCS that concludes this conference call.

Thank you for joining us and you may now disconnect your line. _________________________________________________________________________________

Note

This transcript has been edited for readability and does not purport to be a verbatim record of the proceedings.

Questions and answers

Moderator · Conference Operator

Thank you very much.

We will now begin the question-and-answer session.

We have a first question from the line of Yogesh Aggarwal from HSBC.

Please go ahead.