TCS Q3 Results Review - Good Growth, Deal Wins To Drive Performance: Motilal Oswal

Motilal Oswal Report

Tata Consultancy Services Ltd. reported revenue of $7.08 billion in Q3 FY23, up 2.2% QoQ in constant currency terms, 60 basis points above our estimates despite seasonal weakness.

The company reported deal wins of $7.8 billion (down 3.7% QoQ/up 2.6% YoY, book-to-bill ratio at 1.1 times), in line with our expectations.

Ebit improved 50 bps QoQ to 24.5%, in line with our estimates, aided by favorable forex (up 70 bps), improved utilisation and lower sub-con costs (up 30 bps), partly offset (down 50 bps) by third-party expenses and travel normalisation.

Last twelve months attrition moderated by 20 bps to 21.3%, while attrition declined 6% QoQ on the quarterly annualised basis. TCS expects the supply situation to further ease, resulting in a continued downward trajectory in attrition ahead.

Overall, management commentary on demand environment indicate caution in the near term despite consistent growth in the deal pipeline, as North America and continental Europe see a near-term deal conversion slowdown on account of macroeconomic challenges. But, TCS reiterated its aspiration of double-digit growth in the medium to long term.

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