We believe TCS’ business mix is more favourable to the current enterprise spends, which are diverted to stimulate core business functions or bring efficiency to their operations. TCS is well positioned to capture those spends and win disproportionately among its peers - Prabhudas Lilladher, a brokerage firm, said in a report

Better Deal Conversion:

• Increasing AI & GenAI-led deals augur well for TCS
• Headcount addition in Q1 indicates its confidence
• TCS witnesses sequential growth in all its verticals

Bengaluru: Tata Consultancy Services (TCS) is well-positioned to garner a larger share of technology spending by enterprises as compared to its peers. According to brokerage firms and analysts, TCS’ Q1 performance and subsequent management commentary indicates that the company is gaining market share as compared to other firms competing in this space.

“We believe the company’s business mix is more favourable to the current enterprise spends which are diverted to stimulate core business functions or bring efficiency to their operations. TCS is well positioned to capture those spends and win disproportionately among its peers,” brokerage firm, Prabhudas Lilladher said in a report.

During the first quarter ended June 2024, TCS witnessed sequential growth in all its vertical and geographical units. Despite showing all round growth, the company’s management refrained from calling out a full-fledged recovery going ahead.

“Despite the strong beat on the topline, the management indicated that the adverse macros continue to impact client confidence which might lead to pausing or reprioritizing programmes with immediate notice,” the brokerage firm wrote.

According to analysts, as uncertainty continues in the demand environment, large firms like TCS are seen as preferred service providers for executing large digital transformation deals.

Especially, they pointed out that increase in headcount showed confidence of TCS in better deal execution in the coming quarters.

After several quarters, TCS saw its headcount rising in the June quarter as the company added 5,452 employees on net basis to take its total employee strength to 6,06,998 during June quarter.

“We have onboarded around 11,000 freshers this quarter. While it is difficult to say how many freshers will be hired, but it should be around 40,000 like previous years,” Milind Lakkad, Chief HR Officer of TCS, said.

In Q1, TCS’ deal book stood at $8.3 billion, which was down from $13.2 billion reported in the previous quarter. Despite fall in the order book, TCS management has shown confidence that FY25 would be a better year than FY24.

“The management mentioned that although the deal wins of $8.3 billion is lower compared to Q1FY24 & Q4FY24, but it is still in its comfort band of $7-9 billion. The management further indicated that deal pipeline remains strong with a healthy component of large deals,” Prabhudas Lilladher wrote in the note.

Meanwhile, rising contribution of generative AI deals has raised hopes of better revenue growth possibilities ahead. The company is currently working on around 270 GenAI projects and the AI & Gen AI pipeline has grown to $1.5 billion from $ 0.9 billion in Q4 of last fiscal year.