sloppysid/faiss_search huggingface dataset:
TCS/SE/202/2022-23 January 11, 2023 National Stock Exchange of India Limited BSE Limited Exchange Plaza, C-1, Block G, Bandra Kurla P. J. Towers, Complex, Bandra (East) Dalal Street, Mumbai - 400051 Mumbai - 400001 Symbol - TCS Scrip Code No. 532540 Dear Sirs, Sub: Transcript of the earnings conference call for the quarter ended December 31, 2022 Pursuant to Regulation 30 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, please find enclosed the transcript of the earnings conference call for the quarter ended December 31, 2022 conducted after the meeting of Board of Directors held on January 09, 2023, for your information and records. The above information is also available on the website of the Company: www.tcs.com. Thanking you, Yours faithfully, For Tata Consultancy Services Limited PRADEEP Digitally signed by PRADEEP MANOHAR MANOHAR GAITONDE Date: 2023.01.11 GAITONDE 21:21:36 +05'30' Pradeep Manohar Gaitonde Company Secretary Encl: As above TATA Consultancy Services Limited 9th Floor Nirmal Building Nariman Point Mumbai 400 021 Tel. 91 22 6778 9595 Fax 91 22 6778 9660 e-mail corporate.office@tcs.com website www.tcs.com Registered Office 9th Floor Nirmal Building Nariman Point Mumbai 400 021. Corporate identification No. (CIN): L22210MH1995PLC084781
Tata Consultancy Services Limited Q3 FY23 Earnings Conference Call. January 9, 2023, 19:00 hrs IST (08:30 hrs US ET) Moderator: Ladies and gentlemen, good day and welcome to the TCS Earnings Conference Call. As a reminder, all participant lines will be in the listen-only mode. Should you need assistance during the conference call, please signal an operator by pressing ‘*’ and then ‘0’ on your touchtone phone. After today’s presentation, there will be an opportunity to ask questions. To ask a question, you may press ‘*’ then ‘1’ on your telephone keypad. To withdraw your question, please press ‘*’ then ‘2’. Please note that this conference is being recorded. I now hand the conference over to Mr. Kedar Shirali – Global Head, Investor Relations at TCS. Thank you and over to you, sir. Kedar Shirali: Thank you, operator. Good evening and welcome everyone. Thank you for joining us today to discuss TCS’ Financial Results for the Third Quarter of Fiscal Year 2023 that ended December 31, 2022. This call is being webcast through our website and an archive including the transcript will be available on the site for the duration of this quarter. The Financial Statements, Quarterly Fact Sheet and Press Release are also available on our website. Our leadership team is present on this call to discuss our results. We have with us today, Mr. Rajesh Gopinathan -- Chief Executive Officer and Managing Director; Mr. N G Subramaniam -- Chief Operating Officer & Executive Director; Mr. Samir Seksaria -- Chief Financial Officer; Mr. Milind Lakkad -- Chief HR Officer. The management team will give a brief overview of the company's performance followed by Q&A. As you're aware, we don't provide specific revenue or earnings guidance. And anything said on this call which reflects our outlook on the future or which could be construed as a forward-looking statement must be reviewed in conjunction with the risks that the company faces. We have outlined these risks in the : Page 1 of 23
Tata Consultancy Services Q3 FY23 Earnings Conference Call January 9, 2023, 19:00 hrs IST (08:30 hrs US ET) second slide of the quarterly fact sheet available on our website and which has been e-mailed out to those who have subscribed to our mailing list. With that, I would like to turn the call over to Rajesh. Rajesh Gopinathan: Thank you, Kedar. Good morning, good afternoon and good evening to all of you. We had very good growth for a seasonally weak quarter. Our US dollar revenue crossed the 7 billion mark in Q3 and revenues grew 19.1% in rupee terms, 13.5% in constant currency terms, and 8.4% in dollar terms. Our operating margin for the quarter was 24.5%, an expansion of 0.5% sequentially. Our net margin came in at 18.6%. I'm very happy to share that the board has announced a dividend of `75 per share, including a special dividend of `67 per share. Including the interim dividends paid out in the first half of the year, this translates into a shareholder payout of `33,297 crore for year-till-date. I will now invite Samir, Milind and NGS to go over different aspects of our performance during the quarter. I'll step in again later to provide some more color on the demand trends that we're seeing. Over to you, Samir. Samir Seksaria: Thank you Rajesh. Let me first walk you through the headline numbers. In the third quarter of FY'23 our revenues grew 13.5% year-on-year on a constant currency basis. Reported revenue in INR was `582.29 billion, an year-on-year growth of 19.1%. In dollar terms, our revenue was $7.075 billion, an year-on-year growth of 8.4%. Moving to the operating margin, we had 70 basis points benefit from the currency movement. Operational rigor including utilization, reduced use of subcontractors, resulted in a net benefit of 0.3% or 30 basis points, offset by 50 basis points headwind from higher third-party expenses and increasing cost of return to normalcy. Overall, our operating margin expanded 50 basis points sequentially to 24.5%. Net income margin was 18.6% impacted by foreign exchange fluctuations. The effective tax rate for the quarter was 25.7%. Our accounts receivable was at 66 days’ sales outstanding orDSO in dollar terms, up four days sequentially. : Page 2 of 23
Tata Consultancy Services Q3 FY23 Earnings Conference Call January 9, 2023, 19:00 hrs IST (08:30 hrs US ET) Net cash from operations was `111.54 billion, which is a cash conversion of 102.8%. Free cash flows were at `102.15 billion. Invested funds at the end of December stood at `669.24 billion. Lastly, as Rajesh mentioned, the board has announced an interim dividend of `75 per share, which includes a special dividend of `67 per share. Total shareholder payout, year till date, amounts to 110% of free cash flow. Over to you, Milind. Milind Lakkad: Thank you, Samir. You might recall that our approach to overcoming the supply side challenges faced by the industry was to bring in fresh talent at scale, and then train them on new technologies. In the prior six quarters, we onboarded 135,000 fresh engineers. In Q3 alone, we brought on about another 7,000 fresh engineers amounting to a total of 42,000 freshers year-to-date. These are unprecedented numbers. Our biggest strength has been nearly 125,000 TCS at middle and senior levels, who have been with the company for over 10 years on average. They have been central to our ability to culturally and operationally integrate all the fresh talent we brought onboard and ensuring that the project outcomes and customer experiences continue to be the best-in-class. Last year, our net hiring was significantly ahead of our revenue growth. Our focus this year has been on utilizing all that excess capacity and making our newest employees productive. Between that and elevated attrition, we had a net reduction of headcount and our workforce strength as of December 31 st stood at 613,974. We continue to have a very diverse workforce with 153 nationalities represented and with women making up 35.7% of the base. On the learning front, TCSers clocked 11.4 million learning hours in Q3, resulting in an acquisition of 1.3 million competencies. LTM attrition in IT services was at 21.3%, slightly down quarter-on-quarter but still very elevated as it reflects the high levels of churn in the prior quarters. Our quarterly annualized attrition on the other hand fell by nearly 6% in Q3, and we expect it to steadily trend down over the coming quarters. Over to you NGS for some color on segments and product trends. : Page 3 of 23
Tata Consultancy Services Q3 FY23 Earnings Conference Call January 9, 2023, 19:00 hrs IST (08:30 hrs US ET) N G Subramaniam: Thank you, Milind. Let me walk you through our segmental performance details for the quarter. All growth numbers are on a year-on-year constant currency basis. Growth was led by Retail and CPG which grew 18.7%, led by strong demand in the Travel and Hospitality segment while retailers had production freezes during the holiday season. Life Sciences and Healthcare grew 14.4%. Technology and Services grew 13.6%. Communications and Media grew by 13.5%. Manufacturing grew by 12.5% while BFS, our largest vertical grew by 11.1%. Let me now walk you through the growth figures by geography. Among major markets, North America as well as UK grew 15.4%, while Continental Europe grew by 9.7%. Moving on to emerging markets, Latin America grew by 14.6%, India by 9.1%, Asia Pacific by 9.5%, and Middle East and Africa by 8.6%. Moving on, our industry-leading portfolio of products and platforms continue to perform well. ignio™, our cognitive automation software suite signed up 10 new customers and 7 clients went live during the quarter. The business health monitoring solution for ignio is gaining traction with customers and went live in over 2,000 stores for a major American auto retailer in Q3. Enterprises are increasing their investment in AI ops, and automation technologies to improve employee productivity and resilience. ignio is uniquely positioned to ride on this particular opportunity with an end-to-end platform that offers self-healing and machine learning ability across the customer lifecycle to help them in their journey of being an autonomous enterprise. TCS BaNCS™, our flagship product suite for the financial services domain had six new wins and seven go lives during the quarter. We continue to gain share in the market infrastructure institution segment with a new win in Q3. The subsidiary of a leading European CFD selected TCS BaNCS market infrastructure, implementing a unique system offering settlement and correspondent banking services to their customers. : Page 4 of 23
Tata Consultancy Services Q3 FY23 Earnings Conference Call January 9, 2023, 19:00 hrs IST (08:30 hrs US ET) One of the largest asset managers in the USA with over US$7 trillion in global assets, migrated its personnel advisory services and digital advice offerings to the cloud-based TCS BaNCS to its management platform, enhancing their advisor experiences, improving accuracy and low latency responses for performance configuration analytics for millions of customer portfolio of record numbers. Our Quartz blockchain platform have two new wins and one go live in Q3. A Swiss multinational pharma major has increased their adoption of Quartz further, building on the successful initial pilots we executed using blockchain, smart contracts and digital payments. Quartz smart solution for contract performance monitoring and Quartz Gateway are going to be used to eliminate inefficiency in cross-functional manual processes entailing procurement, finance and treasury. In Life Sciences, TCS ADD™, our Advanced Drug Development platform, enabled by artificial intelligence was implemented for two leading pharma companies for automation of adverse events intake and processing. With this, TCS ADD has successfully completed automated processing of half a million adverse event cases. Our offerings in this platform address patient centricity, smart clinical analytics, interoperability, and AI-enabled automation, that are emerging trends in the life sciences industry. TCS Optumera™, our artificial intelligence powered retail merchandising suite went live for four clients. TCS OmniStore™, our AI-powered universal commerce suite had two go lives. TCS HOBS™, our suite of products for communication services has one new win and four go lives in Q3. TCS iON had seven wins in the quarter ending December. During this period, we served over 35 assessment customers and administered exams for 8.8 million candidates. We reached a new industry partnership milestone in Q3, engaging with 1,580 corporates that leverage the TCS National Qualifier Test as their entry level recruitment platform. Over 3,700 candidates have gotten placed till-date. Lastly, MasterCraft™ and Jile™ had won 10 new clients in Q3 and 21 renewals. : Page 5 of 23
Tata Consultancy Services Q3 FY23 Earnings Conference Call January 9, 2023, 19:00 hrs IST (08:30 hrs US ET) Let me now go over our client metrics. These metrics are an important validation of our customer-centric business model. In Q3, we added one more client year-on-year in the $100 million plus band, bringing the total to 59; 12 more clients in the $50 million plus band, bringing the total to 130; 35 more clients in the $20 million plus band, bringing the total to 290; 30 more clients in the $10 million plus band bringing the total to 456; 39 more clients in the $5 million plus band, bringing the total to 658 and 42 more clients in the $1 million plus band bringing the total to 1,217. Let me now request Rajesh to speak on the demand drivers. Rajesh Gopinathan: Thank you, NGS. As mentioned by NGS, the seasonality led to some moderation in growth in verticals like BFSI, Retail and Technology and Services and across all our key markets. While the seasonal aspect should reverse in the next quarter, the macroeconomic uncertainties are likely to result in a more balanced year in 2023 after two years of strong growth. For now we see a client caution translating into greater focus on cost optimization. We're seeing an increase in the number of large operating model transformation engagement. In the first three quarters of FY'23, we won 20 such deals versus 16 in the prior year same period. Our innovative approach to redesigning the operations and embedding AI and intelligent automation into individual processes using TCS Cognix™ has been delivering superior outcomes for our clients and differentiated positioning for TCS. We are also seeing an uptick in vendor consolidation. Our scale, full services capability and track record of delivering outsized savings through operating model transformation is helping us win such deals. We have won quite a few such deals across BFSI healthcare, manufacturing and telecom and we see many more in the pipeline. Here is a good illustration: The BT Group, UK's leading provider of fixed and mobile telecommunication, announced a new partnership with TCS for its digital unit to boost its modernization plans. TCS will manage and ramp down over 70% of digital legacy technology estate, and boost capacity to accelerate the build of its new strategic technology architecture, supporting the group's growth. : Page 6 of 23
Tata Consultancy Services Q3 FY23 Earnings Conference Call January 9, 2023, 19:00 hrs IST (08:30 hrs US ET) Coming to cloud transformation, it continues to be a strong area of growth. As I had mentioned in the last quarter, clients are much more focused on execution of their cloud journeys and the increased intensity is translating into an expanded opportunity for us. Our strategic industry-specific solution fabrics built on market leading hyper scalar platforms accelerate enterprise digital transformation and drive exponential business value through industry innovation. We won several new cloud transformation deals in Q3. Here are a few examples. We were selected by Boston Scientific Corporation, a global medical devices company as a strategic partner for their purpose-led, enterprise-wide multi- cloud acceleration program. TCS' decade-long transformative partnership will help deliver cloud-native resilient and futuristic operations that will fuel Boston Scientific's global business growth and its mission of transforming lives through innovative medical solutions. TCS expanded its partnership with the UK headquartered international savings and investment firm to help them transform into a cloud-only organization by 2025, through a series of technology and business transformation initiatives. Leveraging its deep contextual knowledge of the client's IT and business landscape, TCS will help modernize and transform their application estate using cloud-native architecture, and seamlessly migrate them to a public cloud using TCS Cloud Counsel and TCS Migration Factory. This will also simplify the legacy infrastructure estate and facilitate their exit from on-premise data centers. We have been engaged by the largest online travel company to build a unified, modernized enterprise data platform, which entails creating a data lake abstracting data from transitional systems and other data sources and building intelligent self-learning engines leveraging AI/ML models and rendering seamless experiences to customers and associates. The marketing meta- analytics we deploy will enable greater personalization and tailored recommendations on their portal. Moving on to growth and transformation, we usually talk about G&T engagements focused on the front end, helping clients launch innovative new : Page 7 of 23
Tata Consultancy Services Q3 FY23 Earnings Conference Call January 9, 2023, 19:00 hrs IST (08:30 hrs US ET) products and services or new technology-enabled business models or channel improvements and personalization that enhance customer experience. I'll come to those in a bit, but before that, I also wanted to share some examples of how technology-led innovation at the back-end can also result in revenue growth and improved customer satisfaction. Predictive analytics, machine learning and AI are fueling such innovation. Let me illustrate with three examples. PostNord, a European communications and logistics solution provider has partnered with TCS to achieve their `Win in Parcels’ key strategic priority and to be the market leader. Their key objective is to transport more parcels per truck in each trip made between the terminals and their regional hubs. TCS developed a touchless AI-based solution using machine vision and importantly, existing security CCTV cameras, to accurately measure the truck fill rate in real-time. It leverages a TCS proprietary algorithm to optimize the line haul planning and truck departures. This has helped improve the revenue yield per truck, reducing the number of trips and associated costs, and even the carbon footprint. TCS partnered a US headquartered multinational biopharmaceutical company in co-creating and implementing an industry-first AI-based solution to transform the handling of patient complaints about drug-device combination products, such as pre-filled injections and auto injectors. The solution triages complaints and automatically separates out product- related complaints from drug-related adverse events, resulting in faster processing of complaints, timely feedback to patients and to internal design and production teams for remediation. This has helped improve product quality, enhance patient experience and contributed to improved sales of such combination products. Toyota Material Handling in North America engaged TCS to transform its field service teams’ ability to diagnose and repair. TCS’ solution enables guided troubleshooting, self-service and cognitive search of technical product support content using AI/ML and NLP, which helps reduce downtime associated with unplanned maintenance by 10% to 15%. The transformation has improved first time right fix, reduced dealer overheads and resulted in service stickiness, : Page 8 of 23
Tata Consultancy Services Q3 FY23 Earnings Conference Call January 9, 2023, 19:00 hrs IST (08:30 hrs US ET) leading to increased service part sales for dealers and to Toyota Material Handling. M&A continues to be a recurring theme in our customers T&T agenda. They have been entrusting us with these integration or divestiture mandates on account of our contextual knowledge of the business and IT landscapes, our highly collaborative inside-out approach to transformation, and proprietary accelerators such as TCS Crystallus™, a set of pre-configured industry and business solutions available on leading enterprise application platforms. Here are three examples: Philips Domestic Appliances, a carve-out from Royal Philips and a global leader in kitchen coffee, garment care and home care appliances, engaged TCS as a sole-sourced primary partner to support PDS’ transition to an independent entity, and its business transformation to become a digital-first and consumer-centric organization. TCS established a digital core for the new business, designed lean business processes and successfully rolled out the pilot in seven countries. We are now working towards a big bang go-live for the rest of the world. This is expected to be the foundation for a 10x growth in sales from expansion into new markets and channels, with 20 million highly engaged customers. Similarly, we are helping a leading North American bank with the seamless merger of a US bank. TCS' deep contextual knowledge and platform expertise was critical for success in this large and complex M&A program, involving online banking channels, treasury and payment services, auto and equipment financing, among others. TCS did an end-to-end mapping of the products and processes of the acquired bank and carried out a parity uplift to ensure consistent experience for incoming acquired bank customers. At the back end, we integrated new lending and leasing products into the acquirer bank's portfolio and migrated the acquired bank’s products, customers and users to the acquirer’s platforms. With the successful integration, the acquirer bank expanded into a large complementary contiguous market in the US, doubling its branch footprint and onboarded over 1.5 million new customers and inherited a strong commercial business with a high-quality loan portfolio. : Page 9 of 23
Tata Consultancy Services Q3 FY23 Earnings Conference Call January 9, 2023, 19:00 hrs IST (08:30 hrs US ET) Finally, in Q3, we were chosen by European life and material sciences company to lead the global integration of one of the largest acquisitions. TCS is responsible for end-to-end integration of warehouses and factories. It will set up a transformation management office to enable faster realization of synergies, and serve as the foundation for future M&A. Let me now provide a few examples of TCS partnering with clients to use digital technologies to help launch innovative new products or services that drive new revenue streams. A leading US-headquartered media and technology multinational partnered with TCS for building a single digital ecosystem platform, spanning home entertainment and mobility. As the sole strategic partner, TCS was responsible for the full lifecycle of the new technology platform for this new line. TCS designed and implemented the solution through an API grid for the entire ecosystem leveraging AI/ML for agile operations, proactive care, proactive service management, and preventive fault management. The new business model helped deliver truly personalized and unique customer experiences to end-customers. It recently crossed 5 million customer connection and witnessed high NPS score and customer satisfaction ratings. TCS helped a leading US money transfer service provider transform its technology estate into modern cloud-powered platform, enabling it to launch new products faster, expand into new markets and strengthen its customer relationships. Leveraging the new integrated next-generation multi-currency digital wallet and digital banking platform, our clients have forayed into digital banking in Europe, offering customers access to a variety of differentiated multicurrency payment services in a single app. The new platform has also helped the client successfully integrate with cross-industry ecosystem partners to offer millions of customers greater ease, reliability and access to money movement, and payment service capabilities. Overall, the transformation has resulted in increased customer loyalty, reduced customer journey barriers and created new revenue streams. Similarly, in Q3, an APAC-based automotive electronics manufacturer chose TCS as their co-innovation partner in developing a next-gen instrument panel : Page 10 of 23