TCS CEO K Krithivasan: CY25 could outperform CY24, signs of improved discretionary spending

TCS CEO K Krithivasan: CY25 could outperform CY24, signs of improved discretionary spending

Tata Consultancy Services (TCS) CEO and MD K. Krithivasan expressed optimism about the company’s medium-term prospects during a media briefing on Thursday, January 9, 2025. Highlighting improving business sentiment and an uptick in discretionary spending across select verticals, he pointed to positive signs for the future.

Company Value Change %Change

“After witnessing negative constant currency (CC) growth across major geographies, we are now seeing an improvement in sentiment around discretionary spending in certain verticals. The total contract value (TCV) going up after two quarters further reinforces our confidence in the medium term,” Krithivasan told CNBC-TV18.

Krithivasan emphasised that 2025 holds better prospects compared to the previous year. “We are comfortable saying that CY25 should be better than CY24,” he added.

Deal wins and financial performance

TCS reported total deal wins worth $10.2 billion during the December quarter, marking a significant increase compared to $8.6 billion in the September quarter and $8.1 billion in the same quarter last year. This also marked the first instance in three quarters that TCS surpassed $10 billion in deal wins.

$ bn Q1FY24 Q2FY24 Q3FY24 Q4FY24 Q1FY25 Q2FY25 Q3FY25
Deal wins 10.2 11.2 8.1 13.2 8.3 8.6 10.2

India’s largest IT services exporter posted a 12% year-on-year jump in net profit to ₹12,380 crore for the December quarter. This compares to ₹11,058 crore in the same period last year and ₹11,909 crore in the preceding September quarter.

The company’s total income rose by over 6% to ₹65,216 crore from ₹61,445 crore in the year-ago period, slightly exceeding the ₹64,988 crore reported in the previous quarter.

Q1FY24 Q2FY24 Q3FY24 Q4FY24 Q1FY25 Q2FY25 Q3FY25
$ Rev 7226 7210 7281 7363 7505 7670 7539
$ Rev QoQ 0.43% -0.22% 0.98% 1.13% 1.90% 2.20% -1.70%
$ Rev YOY 6.60% 4.84% 2.91% 2.33% 3.90% 6.40% 3.50%
EBIT % 23.20% 24.26% 25% 26% 24.66% 24.10% 24.50%
PAT 11,079 11,342 11,735 12,240 12,040 11,909 12,390

In US dollar terms, TCS reported revenue of $7,539 million, which was below the CNBC-TV18 poll estimate of $7,626 million. Sequentially, revenue declined by 1.7%, while the poll had projected a 0.6% drop.

Workforce and attrition

Krithivasan noted that growth and headcount do not have a direct correlation. Despite a reduction in its employee base by over 5,000 to 6,07,354 during the quarter, the company remains committed to hiring. TCS is on track to onboard 40,000 campus trainees as part of its hiring plans.

TCS Q1FY24 Q2FY24 Q3FY24 Q4FY24 Q1FY25 Q2FY25 Q3FY25
Headcount 615318 608895 603305 601546 606998 612724 607354
Net QoQ 523 -6333 -5590 -1759 5452 5726 -5370
 
Attrition 17.80% 14.90% 13.30% 12.50% 12.10% 12.30% 13%

The company’s attrition rate stands at 13%, which is within its comfort range. Krithivasan expects quarterly attrition rates to decline further in the coming quarters.

Market performance and dividend announcement

Shares of TCS closed 1.5% lower on Thursday at ₹4,044. Over the past 12 months, the stock has underperformed its peer Infosys and is currently trading at a discount to Infosys in terms of price-to-earnings multiples.

The company announced a total dividend of ₹76 per share for shareholders, including ₹10 as the third interim dividend for FY25 and a ₹66 special dividend.

Outlook for CY25

Krithivasan expressed optimism about the coming year, underpinned by signs of improving discretionary spending and strong deal momentum. With increasing TCV and a promising pipeline, TCS appears well-positioned to navigate challenges and capitalise on emerging opportunities in 2025.

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