IT-giant, Tata Consultancy Services touched milestones in the financial year FY22 with incremental revenue being the highest ever and order book reaching its all-time high. The top-line front was driven due to double-growth across mid to high teens. Also, the IT major managed the year's headwinds by continuing to deliver an industry-leading operating margin. TCS profitability was just shy of ₹10,000 crore level, while its revenue boomed above ₹50,000 crore mark.
TCS garnered a consolidated net profit of ₹9,926 crore in Q4FY22, rising by 7.4% against ₹9,246 crore in Q4FY21, while the company's revenue stood at ₹50,591 crore increasing by 15.8% from ₹43,705 crore of the same quarter last year. On a year-on-year basis, the constant currency revenue growth was at 14.3%. The company also recorded a TCV order book of $11.3 billion in Q4.
Meanwhile, for the full year FY22, the Tata Group's IT flagship company recorded the highest ever incremental revenue of $3.533 billion along with an all-time high order book TCV of $34.6 billion in the fiscal year. In rupee terms, FY22 revenue and net income came in at ₹191,754 crore and ₹38,327 crore up by 16.8% yoy and 14.8% yoy respectively. In terms of constant currency revenue, the growth was at 15.4% year-on-year.
Rajesh Gopinathan, Chief Executive Officer and Managing Director said: “We are closing FY 22 on a strong note, with mid-teen growth and adding the maximum incremental revenue ever. Increasing participation in our customers’ growth and transformation journeys, and an all-time high order book provide a strong and sustainable foundation for continued growth ahead."
Here is the list of 10 key takeaways from the earnings.
1. Industries verticals:
In Q4FY22, TCS all verticals grew in the mid to high teens. The revenue growth was led by Retail and CPG (22.1%),
Manufacturing vertical (+19%) and Communications & Media (+18.7%). Technology & Services grew (+18%) and Life Sciences and Healthcare grew (+16.4%) while BFSI grew (+12.9%).
For the entire FY22, the growth continued to be led by Retail and CPG (20.6%), followed by the Manufacturing vertical (+19.4%), Life Sciences, and Healthcare (+19.2%). BFSI grew (+16.7%), Technology & Services grew (+15.8%) and Communications & Media grew (+14%).
2. Markets growth:
Among major markets, growth was driven by North America which grew (+18.7%). UK grew (+13%), Continental Europe grew (+10.1%). Among emerging markets, Latin America grew (+20.6%), Middle East & Africa grew (+7.3%), India grew (7%), and Asia Pacific grew (+5.5%) during the fourth quarter of FY22.
While in the entire FY22, the growth saw robust in North America (+17.5%), Continental Europe rose (+15.1%) and the UK growing (+14.3%). In emerging markets, Latin America grew (+18.2%), India grew (+16%), Middle East & Africa grew (12.9%) while the Asia Pacific grew (+6.7%) growth.
3. Services Demand:
The company highlighted that TCS continued to witness strong demand in services in the quarter as well as the full year across all markets, industries, and services, with growth led by Cloud, Cyber Security, Enterprise Application Services, and IoT & Digital Engineering.
4. Client Metrics:
The company added 10 clients on the annual basis in the more than $100 million buckets, meanwhile, 19 clients were added in the $50 million bucket, 40 clients in the $20 million bucket, and 52 in the 10 million bucket.
5. Margins:
N Ganapathy Subramaniam, Chief Operating Officer, and Executive Director said: “It is immensely satisfying to close the year with robust, broad-based growth, industry-leading margins and the highest ever order book. During the year, we took on technologically challenging, industry-first transformational programs and brought to bear the full power of TCS’ capabilities and that of our partner ecosystem, to successfully deliver market-changing outcomes."
In the fourth quarter, TCS' operating margin was at 25%, while the net margin stood at 19.6%. Meanwhile, the company posted an industry-leading operating margin of 25.3% for the full financial year.
6. Research and Innovation:
The company has applied for 6,583 patents as of March 31, 2022, including 187 applied during the fourth quarter and has been granted 2,287 patents. For the full year, TCS filed for 704 patents and was granted 437.
7. Human Resources:
During the fourth quarter, TCS added 35,209 employees on a net basis, the highest ever net addition in a quarter. Employee headcount stood at 592,195, a net addition of 103,546 during the year, another all-time high. The workforce continues to be very diverse, comprising 153 nationalities and with women making up 35.6% of the workforce.
IT services attrition continued to climb, reaching 17.4%. However, incremental attrition has moderated.
8. Cash flow:
In Q4, the company had a strong cash conversion with operating cash flow standing at 113% of net income.
As of March 31, 2022, TCS cash and cash equivalents stood at ₹12,488 crore, nearly doubled compared to ₹6,858 crore as of March 31, 2021.
Meanwhile, the company has a free cash flow of ₹39,181 crore for the full financial year FY22.
9. Dividend:
During the announcement of the fourth quarter and full-year FY22 result announcement, the TCS board of directors in a meeting on Monday recommended a Final Dividend of ₹22 per Equity Share of Re l each of the Company which shall be paid/dispatched on the fourth day from the conclusion of the 27th Annual General Meeting, subject to the approval of the shareholders of the Company.
10. Shareholders:
TCS has returned cash to the tune of ₹31,424 crore to shareholders through buybacks and dividends for the full fiscal year.
Samir Seksaria, Chief Financial Officer, said: “While continuing to make all the investments needed to support our growth aspirations, we managed the headwinds this year to deliver an industry-leading operating margin yet again. The successful completion of our fourth buyback in five years is another milestone in our shareholder-friendly approach to capital allocation."
TCS had launched a buyback of ₹18,000 crore at a floor price of ₹4,500 per equity share in the fourth quarter.
What experts say?
Abhay Agarwal, Founder, and Fund Manager, Piper Serica, SEBI Registered Portfolio Management Service Provider said, "TCS results are largely in line with our expectations. The company continues to build on strong momentum and is using its large size to win mega deals of more than USD 1 billion. We are confident that it will continue to drive growth by focusing on these mega deals. The margins are slightly below expectations and a key reason could be a high attrition rate of 17.4%. We expect the attrition rate to stay elevated over the next year as the demand for software engineers is very robust."
"Overall, it is comforting to see that the global demand environment remains robust and TCS is continuing to deliver on its growth targets. The top-of-the-pyramid in the global IT services industry has now got well defined and TCS is a well-established part of it," Agarwal added.
