TCS vs Techm Q4 FY24

TCS reported Q4 FY24 revenue of INR 61,237 crore, up 3.5% YoY in rupee terms, with operating margin expanding 100 bps sequentially to 26%, the highest in 12 quarters. Full-year revenue grew 6.8% in rupee terms, with operating margin at 24.6%. Record quarterly TCV of $13.2 billion and full-year TCV of $42.7 billion (up 25.2% YoY) underscore strong deal momentum, though management remains cautious on near-term discretionary spending. BFSI declined 3.2% YoY but insurance grew; manufacturing and regional markets led growth. Attrition fell to 12.5%. Guidance for FY25 is cautiously optimistic, with management expecting better growth than FY24 but citing headwinds from client caution and discretionary spend pressure. Key risks include continued volatility in client decision-making and potential margin headwinds from wage hikes in Q1.

Guidance read

FY25 growth expected to be better than FY24: Management stated that based on strong TCV, FY25 should be better than FY24, but did not provide specific numbers. Operating margin trajectory similar to FY24: CFO indicated Q1 will see headwinds from wage hikes, with margins clawing back through the year, similar to FY24 pattern. Pricing improvements to drive incremental margins: CFO noted that incremental margins will need to come from pricing improvements, including renewals and new deals at higher prices.

Risk read

Key risks include Client discretionary spend volatility — Management highlighted that clients continue to pause or defer discretionary projects with unclear ROI, creating headwinds to near-term revenue.; Margin headwinds from wage hikes in Q1 — Annual wage increments effective April 1 will pressure margins in Q1 FY25, though management expects recovery through the year.; Unpredictable client decision-making on deal ramp-downs — NGS noted that clients sometimes defer or slow down signed deals, creating volatility that is hard to predict, as seen in BFSI.; Subcontractor cost lever may have bottomed out — CFO indicated that the subcontractor cost optimization that helped margins in FY24 may have limited further scope, reducing a key margin lever..

Promise ledger

Of 3 tracked promises, management 0 met, 0 close, 2 missed, 1 delayed.

Tech Mahindra reported Q4 FY24 revenue of INR 12,871 crore, down 6.4% YoY in constant currency, with EBIT margin of 7.4% (up 200bps QoQ). Full-year revenue declined 4.7% CC, driven by headwinds in the communications vertical. Management outlined a three-year strategy targeting above-peer growth and 15% EBIT margin by FY27, underpinned by Project Fortius aiming for $250M annual savings. FY25 is positioned as a turnaround year with YoY growth expected from Q1. Key risks include execution on the ambitious margin roadmap and continued weakness in telecom vertical.

Guidance read

FY27 EBIT margin target of 15%+: Management targets exceeding 15% EBIT margins by FY27 through Project Fortius and operational improvements. Above-peer average revenue growth by FY27: Revenue growth to exceed peer average by FY27, with FY25 as a turnaround year and gradual acceleration. Project Fortius annual savings of $250M: Average annual savings of $250 million over three years from cost optimization initiatives. Capital allocation: 85% FCF distribution: Board approved policy to distribute at least 85% of free cash flow over five years via dividends or buybacks.

Risk read

Key risks include Execution risk on margin roadmap — Achieving 15% EBIT margin by FY27 requires consistent execution of Project Fortius and pyramid restructuring, which may face delays.; Continued telecom weakness — Communications vertical remains under pressure; recovery may be slower than expected, impacting overall growth.; Integration of acquired companies — Portfolio companies need to be integrated effectively; past acquisitions have not always met expectations.; Market environment dependency — Growth plan assumes no severe downturn; if macro worsens, revenue recovery may be delayed..

Promise ledger

Of 2 tracked promises, management 0 met, 0 close, 2 missed.