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Revenue for Q4FY23 below estimates: TCS revenue in rupee term came in at Rs 59,162cr, up by 1.6% QoQ, below our expectation of 3.5% growth QoQ, while it grew by 16.9% YoY. Its dollar revenue stood at USD 7,195Mn, up by 1.7% QoQ and 7.5% YoY. The growth in revenue was because of continuous demand from cloud and data transformation services along with growth in Europe region as well as growth from Retail and Life Science & Healthcare segment. Further for FY23, rupee revenue grew
by 17.6% to Rs 2,25,458cr while dollar revenue came at USD 27,927Mn with a growth of 8.6% YoY and it also witnessed a growth of 13.7% in constant currency for the year.

EBIT margins flat QoQ: TCS posted EBIT growth of 1.4% QoQ and 14.7% YoY, while margins remained flat QoQ and seen a decline of 47bps YoY at 24.5%.For FY23, EBITcame in 54,237cr, growth of 12% while margins at 24.1%, a decline of 121bps YoY. Going forward, the management will focus on improvement in margins by way of cost optimization and generation of higher revenue and winning large deals. Further, PAT grew by 5.1% QoQ and 14.8% YoY to Rs 11,436cr with margin of 19.7% and for FY23, PAT grew by 10% YoY to Rs 42,303cr with margin of 18.8%.

Attrition continued to moderate: TCS attrition saw a decline for the second consecutive quarter which came in at 20.1%, a decline of 120bps QoQ and this is positive. For Q3FY23, attrition was at 21.3% while it stood at 17.4% in Q4FY22. Going ahead, management expects further cooling off of attrition which will aid in margin improvement.

Deal wins remains resilient: The Company won deals worth Rs USD 10bn for Q4FY23, a growth of 28.2% QoQ while for FY23 deals wins stood at USD 34.1bn as compared to 34.6bn in FY22.

Management outlook: 1) Demand environment remained strong on cloud and data related services. 2) They faced a challenging environment in the North American region and BFSI segment. 3) Clients' spends were prioritized as it focused on costoptimization, vendor consolidation and automotive initiatives. 4) Medium to longterm growth prospects seems strong given the demand for services, healthy deal pipeline and TCS strong position across market.

Outlook & Valuation: We remain positive for TCS on the back of strong deal momentum and continue demand for cloud & automation, cyber security and other services. Also, TCS healthy relationship with its clients and employees, moderating
attrition and its focus on improving products & cost optimization measures will aid growth for the company. However, in the near term there may be some challenges for orders from BFSI and the American region but things will improve from a medium
to long term perspective. Thus, we have estimated its revenue/EBIT to grow at 16.1/18.2% CAGR over FY23-25E and have maintained a Buy rating with a target price of Rs 3,882.

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