Captains Speak     

Published: May 15, 2024
Updated: May 15, 2024

TCS Ltd

New AI centre in Paris in June

"The TCS AI Centre of Excellence in Paris will leverage TCS' global ecosystem of startups, academia, and research organizations to bring the best of global capabilities to French companies. The new centre will join France's growing AI ecosystem and tap into its deep talent base in design and engineering, to build advanced technologies in the space of human-centric AI. It will focus on pushing the boundaries of how AI can be designed and evolved to address business efficiencies and societal priorities. The impact areas will include some of the key priorities listed in France's National Strategy for AI, as part of the France 2030 plan.

YEAR-END GAINS

Reviewing the performance of the company during the last quarter and the fiscal year ended March 2024, Mr Kruthivasan said that the company closed Q4 and FY24 on a strong note with the highest ever order book and a 26% operating margin. Revenue during Q4FY2024 increased 3.5% YoY to Rs 61,237 crore. In US dollar terms, revenue for the quarter stood at $ 7,363 million, up 2.3% YoY, while in constant currency terms the growth was 2.2% YoY. Revenue for the full year FY2024 stood at Rs 2,40,893 crore, up 6.8% YoY and up 3.4% YoY in constant currency terms.

EBIT margins for the quarter stood at 26.0% in Q4FY2024, up 100 bps sequentially. There was a headwind of 90 bps due to higher third-party costs and increase in travel expenses, which was offset by 190 bps by favourable currency movement, reduced sub-con cost, improved productivity and better utilization. Margins have improved sequentially in all the preceding 3 quarters by around 100 bps.

According to Mr Krithivasan, incremental margin growth is expected to come from focused execution, improved pyramid, productivity and utilization. Pricing will also be a lever for incremental margin. However, sub-contractor cost has bottomed out and is expected to bounce back. The company expects headwinds in margins in Q1FY2025 due to salary increments and expects to improve sequentially in subsequent quarters. EBIT margins for the year stood at 24.6%, up 50 bps. The total workforce stood at 6,01,546 with a decline of head count by 1,759 on a sequential basis.

Mr Krithivasan added that the company is implementing wage increases of around 4.5-7% across the boa exceptional performers receiving double-digit raises effective April 1, 202

AVIVA DEAL

Pointing to the growing order book, Mr Krithivasan revealed that the company has reported a strong order book of TCV $13.2 billion for Q4FY2024. The company signed one mega deal with AVIVA. The deals are getting converted to revenue as expected. The FY2024 order book TCV stood at $ 42.7 billion, up 26% YoY

As regards the future outlook, he maintained that the company expects FY2025 to be better than FY2024. The management is cautious in the short term as short-term demand remains volatile and unclear. The company is unable to predict the customers' willingness to spend. However, this will bounce back once the economy stabilizes.

The company expects emerging economies, including Latin America, India, the Middle East and Asia-Pacific to grow. However, the base of the same is small.