Categories Concall Highlights, Earnings, Technology

Tata Consultancy Services Ltd Q3 FY23 Earnings Conference Call Insights

Key highlights from Tata Consultancy Services Ltd (TCS) Q3 FY23 Earnings Concall

Management Update:

  • [00:06:42] TCS said LTM attrition in IT services stood at 21.3%, marginally down QonQ and quarterly annualized attrition also fell by about 6% in 3Q23.
  • [00:13:00] TCS commented that a more balanced year is expected in 2023 due to macroeconomic uncertainties, after two years of strong growth.

Q&A Highlights:

  • [00:27:09] Kumar Rakesh from BNP Paribas enquired about the headcount moderation and expectation to end the year with a 4% YoY headcount growth and if it’s an indication of growth visibility. Rajesh Gopinathan CEO said TCS is confident with its net headcount, and have been prudent about hiring for FY23. Going forward, TCS should be back to a more normal hiring trend, in the range of 125,000-150,000 gross for the year, offsetting it with a more expected normalization of attrition to long-term averages.
  • [00:31:36] Vibhor Singhal of Nuvama Equities asked about the drivers of strong performance of retail segment in 3Q23. Rajesh Gopinathan CEO replied that it’s due to Travel & Hospitality performing strongly. In CPG, analytics, sustainability, direct-to-customer is gaining lot of traction. And in retail, grocery also did well.
  • [00:35:32] Vibhor Singhal at Nuvama Equities asked if the momentum in the Travel & Hospitality segment to continue in the coming quarters. Rajesh Gopinathan CEO answered that the company does think the momentum will continue, if there are no major events happening like lockdowns. TCS added that the sector is supply constrained on the demand side and with more capacity, it should continue to do well.
  • [00:39:52] Sudheer Guntupalli with Kotak Mahindra Asset enquired about the medium term growth prospects for TCS. Rajesh Gopinathan CEO replied the company’s stance is very positive. Market by market, US is strong and UK is also going well. But Europe, once the geopolitical situation calms down TCS expects to do well. So TCS is confident about the medium to long term outlook.
  • [00:41:33] Pankaj Kapoor from CLSA queried if cost takeout deals are moving faster in terms of decision-making, and if there’s increased competitive intensity from other lenders. Rajesh Gopinathan CEO answered that decision making speed is varying by market. UK decision making is quite fast, US is normal, and Europe has slowed down significantly. However, the competitive intensity remains high with a narrower field of competitors than in past years.
  • [00:43:26] Pankaj Kapoor of CLSA asked if there’s a rethink in terms of the mode of capital return in favor of dividend versus buyback. Rajesh Gopinathan CEO said there is no rethink in terms of the mode of capital return in favor of dividend versus buyback.  TCS cannot consider a buyback now due to regulatory considerations, but it may consider in future when possible from a regulatory perspective.
  • [00:44:52] Sandeep Shah with Equirus Securities asked about the current state of enterprise cloud adoption and if the pace would increase in CY23 despite macro issues. Rajesh Gopinathan CEO said customers have different challenges when it comes to cloud transformation. Some need to better architect their applications to leverage the variability of the cloud model, while others may need help with complex workload migration. It will take time and effort to properly execute these transformations, and it won’t be a quick process.
  • [00:47:28] Sandeep Shah from Equirus Securities enquired if IT budgets will be lower in 1H CY23 vs. 2H or stay the same as other years, given the macro slowdown. Rajesh Gopinathan CEO clarified that in UK, there will be no major shift vs. last year. In the US, TCS is hopeful that caution will dissipate a few months into the year. In Europe, TCS will be incrementally cautious this year vs. last year.
  • [00:52:15] Ravi Menon of Macquarie asked that SG&A, travel costs increasing sharply and if travel will be a continued headwind that will stabilize at this level. N. G Subramaniam said that as normalcy continues to return, TCS expects travel costs to start increasing towards pre-pandemic levels with sales related costs and team meetings increasing.
  • [00:55:36] Gaurav Rateria at Morgan Stanley asked if the ACV growth could be lower than TCV growth due to changing deal mix, and if the deal win trajectory could increase in coming quarters. Rajesh Gopinathan CEO said there has been no major change in the mix of deals between large or small or long-dated or short-dated, but there has been an elongation in decision-making which is causing the qualified pipeline to grow ahead of the TCV growth.
  • [00:57:51] Ashwin Mehta from Ambit Capital asked about the nature of demand in the strong growth in regional market and others. Rajesh Gopinathan CEO replied the nature of demand has come from both market and product side. India and APAC, ex-Australia did well. Also, the product, assets and platform side did well.

Most Popular

Cochin Shipyard Ltd (COCHINSHIP) Q4 FY22 Earnings Concall Transcript

Cochin Shipyard Limited (NSE:COCHINSHIP) Q4 FY22 Earnings Concall dated May. 26, 2022 Corporate Participants: Madhu S Nair -- Chairman & Managing Director Jose V J -- Director Finance Analysts: Vastupal Shah

All you need to know about Antony Waste Handling Cell in one article

Can you guess the name of the company that was listed during the IPO frenzy in 2020 and is the second largest player in the Indian municipal waste management industry?

Demystifying the Leading Non-Ferrous Recycling Company of India

“Hey, how is the market doing today?” “Oh!, its falling tremendously since morning” I am sure news like these might be a common topic of discussion for you nowadays. Interestingly,