The TCS Q4 FY24 results are being closely watched as the review period is expected to mark the bottoming out of IT sector growth, with a slow but steady rebound anticipated in FY25. With a current valuation of 25 times, the IT sector is 10% above its 5-year average valuation of 23 times.
Among other companies, TCS stands out with a growth rate of 1.3% QoQ, while competitors like Infosys and HCL Technologies see stagnant growth or even a slight sequential fall.
With heightened interest in the estimated performance metrics, investors are ready to scrutinise the Q4 results expectations against the actual performance. That said, let’s look at Tata Consultancy Services’ performance metrics from the TCS Q4 results.
Also read: Decoding IT giants Q1FY24 earnings
About Tata Consultancy Services
The Mumbai-based Tata Consultancy Services Limited (TCS) provides consulting and information technology (IT) services to clients throughout India. As a division of the Tata Group, it has 150 facilities in 46 different countries.
This company has been helping some of the most prominent businesses around the globe with their digital transformation efforts for over fifty years. Consulting is at the heart of TCS’s cognitively driven, holistic range of business, engineering, and technology services.
TCS is the go-to transformation and expansion partner for top companies all over the globe because of its stellar reputation for client focus, extensive subject-matter expertise, and flawless execution. In every major market, TCS has expanded its footprint and established its brand in the last several years. The brand itself is worth USD 13.5 billion.
In Q2FY24, TCS introduced its AI.Cloud company division, which combines cloud computing, data analytics, artificial intelligence/machine learning, and generative AI. As of now, the company’s pipeline includes more than 250 options for Gen AI.
Quarterly performance
| JUN ’23 – Q1 | Sept ‘23- Q2 | Dec ‘23- Q3 | Mar ‘24- Q4 | |
| Net sales (₹ cr.) | 59,381 | 59,692 | 60,583 | 61,237 |
| Net Profit (₹ Cr.) | 11,120 | 11,380 | 11,097 | 12,434 |
| TTM EPS | 115.16 | 119.52 | 122.01 | 123.94 |
According to estimates, TCS would most likely have the highest revenue increase among Tier 1 IT organisations due to the ramp-up of the BSNL transaction. Based on their projections, TCS’s earnings for Q4 would increase by 3-5 per cent year over year (YoY).
After news of Tata Sons’ equity sale made news in mid-March 2024, shares of Tata Consultancy Services were heavily sold. TCS’s share price history is better positioned in the large-cap IT pack thanks to increased contributions from major transactions in past years, decreased subcontract expenses, and higher utilisation throughout the staff pyramid.
If you’re an investor with a medium- to long-term view, you should probably hang on to your blue chip stocks and add more when they decline. TCS’s share price can reach ₹4,200 to ₹4,300 in the future.
According to Jefferies, TCS may expect a sequential sales increase of 1.4% in constant currency terms.
Also read: India’s GDP growth surges to 8.4% in Q3: Key takeaways
TCS Q4 results in 2024: expectations vs reality
| Analysts’ predictions | Actual figures | |
| Net sales (₹ crores) | ₹61,257.4 | 61,237 |
| Net income (₹ crores) | ₹12,083.3 | 12,434 |
| EPS (₹) | 126 | 123.94 |
| EBIT margin | 25.2% | 25.9% |
The expectations were given by JM Financial and the actuals are in line.
Current financials
TCS’s share price today is ₹4,003.80 as of April 12, 2024. Let’s look at the key financials of the stock.
| Metric | Value |
| Market cap (₹ Cr.) | 1,437,303 |
| Book value per share (₹) | 249.91 |
| Dividend Yield | 2.89 |
| ROCE | 58.7 % |
| ROE | 46.61% |
| TTM PE | 32.04 |
TCS’ Q4FY24 performance highlights by sector
| Industries | Q4FY23 (%) | Q4 FY24 (%) | YoY CC growth (%) | FY 2023 (%) | FY 2024 (%) | YoY CC growth (%) |
| BFSI | 32.9 | 31.3 | (3.2) | 33.3 | 32.0 | (1.0) |
| Consumer business | 16.0 | 15.7 | (0.3) | 16.0 | 15.8 | 1.8 |
| Life sciences and healthcare | 10.9 | 10.9 | 1.7 | 10.8 | 10.9 | 4.8 |
| Manufacturing | 8.1 | 8.8 | 9.7 | 8.2 | 8.6 | 7.3 |
| Technology and services | 8.9 | 8.2 | (5.6) | 9.0 | 8.5 | (2.3) |
| Communication and media | 7.1 | 6.6 | (5.5) | 7.2 | 6.8 | (2.6) |
| Energy, resources and utilities | 5.4 | 5.6 | 7.3 | 5.2 | 5.6 | 12.6 |
| Regional markets and others | 10.7 | 12.9 | 26.0 | 10.3 | 11.8 | 19.8 |
| Total | 100.0 | 100.0 | 2.2 | 100.0 | 100.0 | 3.4 |
Market Reaction On Announcement
The news of the Q4 results was well received, and the price closed with a 16% increase from the opening price of ₹3,947.
Competitor information
| TTM PE | Market cap(₹ crores) | ROE | Net profit in 2023(₹ crores) | |
| Infosys | 25.13 | 612,958.60 | 31.95 | 24,108 |
| HCL Tech | 26.62 | 417,917.99 | 22.70 | 14,845 |
| Wipro | 22.22 | 250,749.47 | 14.61 | 11,372 |
| LTIMindtree | 31.56 | 145,043.05 | 26.56 | 4,410 |
Shareholding pattern of TCS
The shareholding pattern (as of December 2023) of TCS is as follows:
| Promoters | 72.41% |
| Foreign Institutional Investors (FIIs) | 12.46% |
| Domestic Institutional Investors (DIIs) | 10.08% |
| Public | 0.02% |
Also read: See how LIC’s Q3 success propels it into the top 5 rankings!/
Investing in Tata Consultancy Services
Pros
- Strong financials: TCS has a history of robust financial performance with a good return on equity (46.61%) track record.
- Debt-free status: The company is almost debt-free, which is a positive indicator of financial health.
- Healthy dividend payout: TCS has been maintaining a healthy dividend payout of 2.88%, which is beneficial for shareholders and denotes stable company performance.
- Better value: With a P/E ratio of 32.27 while the sector’s P/E is 35.62, it suggests that TCS might be a better value investment.
- Market leadership: As one of the leading IT services companies globally, TCS has a strong market presence and brand value.
Cons
- High valuation: TCS stock is trading at a high multiple of its book value (249.91) per share, which might be a concern for value investors.
- Sector volatility: The IT sector can be volatile due to rapid technological changes and global economic factors.
Conclusion
As we can see, the company’s debt-free status, healthy ROE, and consistent dividend payouts make it an attractive investment option, despite the industry’s volatility. As the IT sector braces for a rebound, TCS’s Q4 FY24 results showcased its resilience and strong fundamentals.
However, as an investor, you must monitor the company’s performance and any upcoming trends closely before making investment decisions.
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