tata consultancy services ltd share price Management discussions


Overview of the Industry

Global GDP in FY 2023 was affected by the Russia-Ukraine war and resultant dislocations in supply chains, leading to surging food and energy inflation. Central banks raised interest rates sharply in response. As a result, the global GDP is estimated to have grown at a more subdued 3.4% in 2022, versus 5.9% in the prior year1.

Global technology spending on Enterprise software and IT services crossed the $2 trillion2 mark in 2022, growing 5.5% YoY. IT services grew 3.5% YoY, to $1,250 billion. This growth was led by accelerated cloud adoption, preference for external expertise due to severe talent scarcity, and expanding scope of digital transformation to cover more back-office operational areas.

The global IT services industry continues to be a highly fragmented one, with even the largest provider having a midsingle digit market share. TCS is among the largest IT services providers globally, with a market share of 2.2%, and has outperformed the market, growing significantly higher than market growth over the last decade.

1 World Economic Outlook, IMF, April 2023

2 Gartner 3GRI 2-22

The outperformance may be attributed to market share gains resulting from TCS longer-term, purpose-driven partnerships with its customers, its agile organization structure, and a very stable management team; its investments in organic talent development, research and innovation, intellectual property and in building newer capabilities that have helped expand wallet share with clients; and better execution resulting in greater customer satisfaction.

TCS Business An Overview

TCS is an IT services, consulting and business solutions organization partnering many of the worlds largest businesses in their transformational journeys for the last 55 years. It has a global presence, deep domain expertise in multiple industry verticals and a complete portfolio of offerings - grouped under consulting and service integration, application services, digital transformation services, cloud services, engineering services, cognitive business operations, and products and platforms - targeting every C-suite stakeholder.

The company leverages all these capabilities and its deep contextual knowledge of its customers businesses to craft unique, high quality, high impact solutions designed to deliver differentiated business outcomes. These solutions are delivered using its Secure Borderless Workspaces™ (SBWS™) operating model which enables a highly distributed, Location Independent Agile™ delivery.

TCS geographic footprint covers North America, Latin America, the United Kingdom, Continental Europe, Asia Pacific, India and Middle-East Africa.

TCS considers industry verticals as its primary go-to-market business segments. The key vertical clusters are: Banking, Financial Services and Insurance (BFSI), Communication, Media and Technology (CMT), Retail and Consumer Business, Life Sciences and Flealthcare, Manufacturing and Others.

Strategy for Sustainable Growth3

Customer-centricity is at the heart of TCS strategy, organization structure and investment decisions. TCS customer-centric worldview helps spot trends early, embrace business opportunities by making the right investments and mitigating risks while discharging its social and environmental responsibilities.

TCS has been broadening and deepening customer relationships by continually looking for new opportunities and newer areas in their businesses to add value, proactively investing in building newer capabilities, reskilling its workforce and launching newer services, solutions, products and platforms to address those opportunities.

In the last few years, the company has been using its investments in research and innovation, its intellectual property and deep contextual knowledge of the customers business and technology landscape to proactively pitch ideas and solutions designed to improve the clients topline and help drive competitive differentiation.

These growth and transformation (G&T) engagements are higher value engagements catering to the needs of a broader set of stakeholders in the client organization, enjoying greater visibility within the CXO suite and more closely aligned with their business strategy. An expanding share of this business is helping drive a steady increase in the scope and scale of service: consumed year after year, and an expansion of TCS share of wallet, as evidenced by the client metrics.

Over time, this strategy has resulted in deep and enduring customer relationships, a vibrant and engaged workforce, industry-leading profitability, a steady expansion of the addressable market, and a proven track record in delivering longer term stakeholder value.

Enabling Investments

TCS pioneered4 the use of the word digital to describe the new family of technologies that emerged in the last decade. Quick to recognize the potential of cloud, the company made investments ahead of time in launching new platform-based business models as far back as in 20095, reskilling the workforce, research and innovation, building collaborative workspaces and innovation centers, intellectual property, and alliances and partnerships. Those early investments have given TCS a head start in participating in its customers G&T journeys.

The company continues to invest in co-innovation hubs, launching TCS Pace Ports™ in major markets. TCS teams use these physical spaces to work with academic and start-up partners, ideate jointly with client teams and rapidly build

prototypes. The Pace Ports at Pittsburgh in the US, in the Carnegie Mellon University campus, and the other in Toronto, Canada, were formally inaugurated this year. Including the ones in Tokyo, New York and Amsterdam, the company has five Pace Ports in all.

The company launched joint innovation hubs as well, using the TCS Pace™ framework. TCS and Boots launched an agile incubator called INNOVATE Powered by TCS Pace™, at Boots Nottingham headquarters in the UK. TCS forged a major applied engineering and research partnership with The National Robotarium, UKs largest and most advanced AI and robotics research centre, located at Heriot-Watt Universitys Edinburgh campus.

TCS continued to expand and deepen its industry-leading portfolio of products and platforms, launching new variants within the ignio™ suite and building newer functionality and features in the TCS BaNCS™ suite, HOBS, TwinX, Mastercraft and Jile. TCS Omnistore™ now offers three more modules as part of its AI powered enterprise personalization- Unified and composable commerce, Enterprise personalization, and Marketing hub.

TCS dedicated practice units around AWS, Microsoft Azure and Google Cloud Platform have been steadily investing in training, certifications, credentials and in building solutions and intellectual property on their respective hyperscaler stacks.

In FY 2023, the company crossed the milestone of 100,000 hyperscaler-certified employees. By virtue of being one of their largest system integrator partners with deep domain expertise across multiple areas, TCS was the launch partner for many new solutions introduced by hyperscaler platforms during the year.

The company has leveraged its deep domain knowledge across multiple industries to create an extensive catalog of over 100 industry cloud offerings addressing the needs of clients across 20 industries. The portfolio of TCS solutions available on public hyperscaler cloud platforms continued to expand. In FY 2023, TCS Dexam™, TCS DigiGov™, TCS Cognitive Plant Operations, TCS Mobility Cloud Suite and TCS ESG Integrator were added to the list of existing solutions like TCS Omnistore™, TCS MasterCraft™, 5G Edge Suite, TwinX, TCS Clever Energy™, TCS IP2™ and TCS Envirozone™.

Strategic Responses to Opportunities and Threats

Opportunity / Threat TCS Approach Outcomes
Macroeconomic uncertainty impacting decision making and prompting cost reduction initiatives • Proven track record in helping enterprises reduce their cost of operations.

• Proactive pitching of IT and business operating model transformations that not only deliver greater efficiency, but also enhance enterprise agility, resilience and throughput.

• Leveraging full services capability and deep client relationships to propose product-aligned operating models.

• Use of TCS Cognix™ to accelerate operations transformation, using over 600 pre-built automation components that infuse AI/ML and other technologies into IT and business processes to reduce human intervention, increase velocity and throughput.

• Strong deal flow resulting in a robust order book that gives better visibility of medium-term growth.

• Market share gains in vendor consolidations.

• Efficiency gains helping fund clients transformation programs in some instances.

• TCS Cognix recognized as a means of driving quicker realization of RoI and used by nearly 300 clients.

Opportunity / Threat TCS Approach Outcomes
Greater interest in using • Focused on developing contextual knowledge and applying • Expansion of addressable market.
technology to drive business growth and differentiation that for inside-out transformations.

• Continued investments in research and innovation, TCS

• Growing share of G&T business adding to growth.
Pace Ports, and intellectual property (IP). • Higher quality revenue, lending
• Dedicated practice with domain experts to bring together margin resilience.
TCS differentiated capabilities from across the organization to stitch together comprehensive solutions. • More deeply embedded in the clients business.
• Proactive pitching of solutions to customers most pressing business problems. • Engaging with a broader set of buyers in the client organization.
• New brand tagline ‘Building on Belief to strengthen positioning as a growth and transformation partner. • Higher visibility within C-Suites.
Accelerated adoption of • Dedicated business units with end to end capabilities on • Strong growth in cloud
public cloud each of the hyperscaler platforms. transformation revenues.
• Continued investment by each of these units in skills, • Top tier partner to each of the
certifications, credentials, IP and accelerators. hyperscalers.
• Articulated the multi-horizon cloud transformation • Preferred partner to clients seeking
framework. to use cloud native capabilities
• Made available TCS products and solutions on public clouds. to power their growth and transformation.
• Over 110,000 hyperscaler-certified employees.
Greater acceptance of • Strengthened alliances and launched new offerings around • Stronger win-win partnerships.
as-a-Service platforms the popular and new SaaS products. • Expansion of addressable market.
• Helped ISV* clients upgrade their products to launch new SaaS versions. • Strong growth in SaaS sales.
• Partnering with product manufacturers to help launch innovative as-a-Service offerings using TCS Bringing Life to Things IoT framework. • Platforms drive stickier

relationships, with long term revenue visibility.

TCS IP:
• Promoted SaaS versions of in-house product portfolio, now available on hyperscaler platforms.
• Used IP portfolio to launch new platforms that bundle IP and shared services on the cloud.

* Independent Software Vendor Talent Management

TCS aims to attract, develop, motivate and retain diverse talent, that is critical for its competitive differentiation and continued success. The companys talent management strategy seeks to maximize the potential of every employee by creating a purpose-driven, inclusive, stimulating, and rewarding work environment, delivering outstanding employee experience, while fueling business growth. TCS strives to create a vibrant workplace and an engaged workforce by encouraging four behaviors: follow your passion, stay hungry, commit to lifelong learning and thrive together.

In FY 2023, TCS made a net addition of 22,600 employees globally, taking the total employee base to 614,795, representing 150 nationalities.

After two years of remote working, TCS initiated a Return to Office initiative to better integrate and acculturate new recruits, deepen employee engagement levels, drive purposeful engagement and extend the spirit of #OneTCS. As an outcome, 50% of employees started working from office for two or more days in a week.

Industry-First Initiatives

• Intensified focus on equipping the companys mid-level managers with market relevant skills by providing the right learning and certification opportunities to help them succeed in a world of new technologies. More than 90% of the target employee pool is participating in this strategic program and close to 60% is certified in various market relevant skills.

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Xcelerate- The industry recognized Talent Transformation platform for employees, to capture employees aspirations and mapping them to future opportunities. Aspirations

of nearly 2/3rd of TCSers were captured, with ~100K progressing towards their aspired roles.

Engagement with Purpose - A platform for employees to live TCS values through collective community service, enhance organizational belonging and self-actualization. More than 400,000 employees were engaged as part of the initiative.

Talent Acquisition

In FY 2023, TCS responded with agility to the changing supply side dynamics which saw the unprecedented industry-wide employee churn peaking mid-year, then falling sharply in the latter half. This entailed recalibrating talent acquisition dynamically to fully utilize the additional capacity built up in the prior year.

The company remains the preferred employer and one of the largest job creators in IT services in several major markets, for both freshers and lateral hires. In addition to about 44,000 fresh engineers, TCS onboarded its highest ever number of lateral recruits during the year. It also pivoted from a virtual-only mode to a hybrid model of virtual and in-person recruitment focused on attracting the right talent, creating better employee experiences, and building the TCS brand.

Key Achievements:

TCS National Qualifier Test: Over 618,000 students from more than 4,200 institutes in India competed for the opportunity to work for TCS.

• Hiring from Indias top B-schools, including the top 3 IIMs, continues with internship and placement offers as part of the strategic leadership program.

TCS CareersNext: TCS virtual career fair platform was leveraged for conducting 3 virtual hiring drives in this year, yielding over 32,000 registrations and 8,000 job applications.

TCS HackQuest, the companys flagship ethical hacking competition now in its 7th season saw over 58,000 registrations from more than 3,000 institutes across India.

• Programs to improve diversity in hiring produced encouraging outcomes. Rebegin, an initiative for experienced women professionals re-entering the workforce after a break saw nearly 14,000 job applications. Over 200 job applications were received from people with disabilities.

TCS Sigma launched in FY 2023 to provide career opportunities for graduates and postgraduates in pharmacy in the companys life sciences business.

TCS Academic Interface Program continued to engage with faculty and students through focus group connects, workshops, faculty development programs and other campus outreach activities. In FY 2023, TCS engaged with over 216,000 students and about 17,000 faculty members in nearly 1,500 partner academic institutes across the world. More than 2,000 interns were engaged during the year.

Culture and Diversity

TCS is an equal opportunity employer and has a well-defined and progressive Diversity, Equity and Inclusion (DEI) policy embracing all diversity parameters which includes gender, marital status, religion, race/caste, colour, age, ancestry, nationality, language, ethnic origin, socio-economic status, physical appearance, disability, sexual orientation, gender identity and/or expression and any other category protected by applicable law.

TCS recognizes that a diverse and inclusive workforce is necessary to drive innovation, foster creativity, and guide business strategies. Its disclosures around DEI earned it a place in the Bloomberg Gender-Equality Index (GEI) once again. Other highlights include:

iExcel: TCS flagship executive leadership development program for women completed 22 editions, benefiting 1,450 women leaders.

The Diversity Maturity Matrix: An in-house diversity measurement tool that aims at identifying gaps and assessing an organizations maturity in DEI.

Client engagement: Allies of Diversity is a program where senior leadership from client organizations are invited to share diversity best practices. Engagement with 75 C-Suite leaders with 63 different client organizations has been completed till date. An Allies of Diversity conclave was organized in London to provide a forum for DEI leaders

to share organizational learnings. DEI focused learning programs were conducted for 4 client organizations.

The Workplace Coach: A 75-hour internal coach certification program enabling individuals to become coaches. This supports individuals within the organization towards ACC certification. So far, 3 cohorts have completed this program bringing together over 450 internal coaches.

Education and Sensitization: TCS has mandatory online training designed to sensitize employees on key concepts of DEI. 504,255 employees completed this in FY 2023.

Employee Resource Groups: These serve as platforms for under-represented communities and their allies to share concerns, experiences, stories and strategic solutions. TCS has 13 voluntary, employee-led groups that have come together based on shared diversity identity characteristics or interest.

Champions of Equity: This campaign was created to ensure a fair and inclusive culture at the workplace. Under this program, 105,000 employees have taken a pledge till date, to be a Champion of Equity - someone who treats everyone with fairness and transparency, and takes an inclusive approach towards every individual, culture and system.

TCS Culture Survey: As part of the Belongingness campaign, TCS Culture Survey was rolled out and responded to by over 7,000 employees across 7 geographies.

Employee Engagement: Over 84,000 employees participated in DEI learning programs and diversity celebration month.

Supplier Diversity: TCS has a Supplier Diversity Program that identifies certified diverse suppliers that can provide competitive, high-quality goods and services, whose business model is aligned with the companys business strategy.

Talent Development

TCS strongly believes that every employee should have access to market relevant learning opportunities for career growth and no TCSer should be left behind. The company has adopted a segmented approach to learning to ensure this.

TCS Elevate: TCS pioneering program linking learning to career growth and reward covered over 407,000 employees. Over

22,000 employees were identified as high talent and received increased compensation.

Contextual Masters: TCS program to identify tenured employees with contextual knowledge of the customers business and technology landscape, continues to expand. The company has over 64,000 Contextual Masters who are being groomed to be next generation transformation leaders with specially curated leadership development programs designed in collaboration with Ivy league institutions.

Key Metrics:

• 60,000 open positions fulfilled using up-skilled / crossskilled employees.

• TCSers invested in 82.4 hours of learning on average during the year.

• TCSers acquired 53,000 certifications on various

hyperscaler cloud technologies during the year. With over

110,000 cloud certified employees in total, TCS is the #1 partner for Google and #2 partner for Microsoft Azure.

• 500,000 employees trained in digital technologies, with an average of ~7.5 competencies per employee.

• 568,000 employees have acquired Agile competency, with

495.000 of them groomed as Agile practitioners, over

35.000 as Agile certified and about 3,000 as mentors and coaches.

• Taking advantage of the large numbers of employees who started returning to office after two years of entirely virtual working, the company adopted an increasingly phygital (physical + digital) approach to learning and development. Over 80,000 TCSers benefited from in-person training during the year.

Building on Belief through Purposeful People Policies

Based on feedback received from employees, evolving needs of the workforce and best practices in the field of human capital management, the company makes refinements to existing policies and introduces new policy. In FY 2023, TCS:

• Introduced a new policy on workforce fluidity, in keeping with its talent cloud strategy, that encourages employees to take ownership of their careers by seeking new and challenging opportunities at defined periodicity.

• Introduced a policy on flexible work arrangements, which provides necessary support and flexibility for caregivers of young children, expectant women employees, and persons with disability.

• Extended its policy on DEI to include gender identity, individuals with mental variations and HIV/Aids affected persons at the workplace, and to comply with relevant inclusivity laws.

Talent Transformation

TCS has multiple initiatives to help employees grow in their careers:

Mentoring: TCS has been building a culture of mentoring and coaching in the organization through systemic intervention programs as part of its Mentor Capability Building Framework. This was further strengthened during the year with the introduction of two new certifications

- Platinum and NexGen certification in mentoring. TCS currently has about 36,000 mentors in the organization of whom more than 3,500 Gold and Silver certified.

iConnect is a highly collaborative tool designed to help employees reach out to senior mentors for guidance on career paths, and have face to face dialogues about their role and career. In FY 2023, over 29,000 iConnect sessions were initiated.

Talent Review is TCS process to assess and review the leadership pool in the organization. It enables leaders to share their career aspirations and preferences of mobility, followed by an assessment of their leadership attributes. The objective of the program is to create and sustain a healthy leadership pipeline.

Exciting Opportunities is the internal platform to publish niche and critical open positions to the leadership and

high potential communities, thereby facilitating talent mobility. This embodies the companys philosophy of giving the first right of refusal for all leadership positions to internal candidates, thereby enabling better leadership development and building strong organizational loyalty.

Competitive Compensation

TCS business model depends on its ability to attract and retain talent in the highly competitive, global market for software engineers with graduate or post-graduate degrees in engineering and with relevant technical skills.

Compensation levels are merit based, determined by qualification, experience levels, special skills if any, and individual performance. Compensation structures are driven by prevailing practices in each country that TCS operates in.

The merit based, democratized, transparent talent framework - Elevate, is designed to establish a tighter linkage between learning, skill development, career and reward. The company regularly benchmarks its compensation plans and benefits with the market to ensure competitiveness.

At TCS, three months notice is required from either side for termination6. Although most of the organizations activities are performed by full-time employees, TCS uses contractors, especially for short-term assignments or those requiring skills not internally available.

Engagement with Purpose

With more employees returning to work, various programs were run to enable higher levels of engagement. More than

320,000 employees were engaged through townhalls and project confluences with an emphasis on Living my Values,

Build my Career and Lifelong Learning. The company enabled more than 22,000 mentoring sessions and over 15,000 career conversations.

Highlights of the companys key engagement forums:

New Joinee Integration: Various structured programs such as meet and greet sessions, workplace visits and leader connects were organized to improve the integration experience of new joiners at various milestones of their induction in the initial one year. The effectiveness of these programs was demonstrated by the high 83% iBelong satisfaction index.

TCS Cares: Aims to build an emotionally strong and mentally resilient workforce. A special edition targeting leaders saw participation by over 1,100 leaders. 87% of participants agreed that it helped in their wellbeing and 80% agreed that their productivity increased after attending this program.

Fit4life: Builds a fraternity of health and fitness conscious employees and creates a culture of fitness. 54,000 active participants logged physical activity equivalent to running 24 million kms.

Purpose4Life: Forum for volunteering for community projects in the areas of education, health and environment. More than 40,000 volunteers participated in various social

6 GRI 402-1

outreach initiatives, contributing 898,000 volunteering hours that benefited 394,000 individuals in the community.

PULSE: Pulse 2022 recorded an enthusiastic participation with more than 400k employees taking in the survey. TCS has achieved Satisfaction Index of 79.5 and Engagement Index of 81.0.

Other engagement and collaboration platforms in TCS include:

Knome, KnowMax, GEMS: Platforms for social collaboration within the organization, learning, sharing and for rewards and recognition.

Safety First: Initiative focused on employee safety and security.

Maitree: Community of TCSers and their families who plan activities that help create a bond among employees and promote work-life balance.

Employee Retention

TCS values-driven culture, progressive HR policies, and philosophy of investing in people and empowering them have been integral to creating a culture of belonging and One TCS and also made it an industry benchmark in talent retention.

The companys philosophy of grooming leadership from within, and giving first right of refusal to internal talent for new open positions, inspires higher levels of loyalty to the organization. This has resulted in a very strong, deeply acculturated mid-layer with long tenures in the company. This cohort played a pivotal role in seamlessly integrating new talent in FY 2023 and added significant value through their contributions and contextual knowledge.

Unprecedented levels of employee churn across the industry drove TCS attrition to an all-time high in the first half of FY 2023. It trended down in the second half. IT services attrition was 20.1% on an LTM basis.

Occupational Health and Safety

TCS has a well-defined Occupational Health and Safety (OHS) policy and supporting processes to ensure the safety and well-being of its employees. Safety lead and lag indicators are measured across the organization and reported. The Stakeholders Relationship Committee in the Board reviews the companys health and safety performance on a half-yearly basis. Over 94% of the workforce is represented in joint management- employee health and safety committees that monitor, advise, and drive occupational, health and safety initiatives.

TCS is certified to ISO 45001:2018 Occupational Health and Safety Management System standard across 127 of its facilities worldwide covering approximately 94% of its total footprint.

The company continued to focus on creating ergonomic awareness including correct postures and workstation stretches for an office-based work environment and remote working environment, as employees worked in hybrid mode during the year. General safety awareness (fire safety, office safety, road safety etc.,) and safety incident reporting awareness was also provided to employees through monthly themes and campaign initiatives. There were also several fitness programs, including yoga and meditation practices, mental health and wellbeing which drew employee participation.

FINANCIAL PERFORMANCE OVERVIEW

The discussions in this section relate to the consolidated, Rupee-denominated financial results pertaining to the year that ended March 31, 2023. The financial statements of Tata Consultancy Services Limited and its subsidiaries (collectively referred to as TCS or the Company) are prepared in accordance with the Indian Accounting Standards (referred to as ‘Ind AS) prescribed under section 133 of the Companies Act, 2013, read with the Companies (Indian Accounting Standards) Rules, as amended from time to time. Significant accounting policies used in the preparation of the financial statements are disclosed in the notes to the consolidated financial statements.

The following table gives an overview of the consolidated financial results of the company:

( crore)

FY 2023

FY 2022

Amount % of Revenue % Growth Amount % of Revenue
Revenue from operations 225,458 100.0 17.6 191,754 100.0
Earnings before interest, tax, depreciation and amortization (EBITDA) (before other income) 59,259 26.3 11.7 53,057 27.7
Profit Before Tax (PBT) 56,907 25.2 10.1 51,687 27.0
Profit after tax attributable to shareholders of the company 42,147 18.7 10.0 38,327 20.0
Earnings per share (in ) 115.19 11.2 103.62

Analysis of revenue growth

On a reported basis, TCS revenue grew 17.6% in FY 2023, compared to 16.8% in the prior year. The growth was driven by accelerated spending on digital transformation initiatives, cloud adoption and increased outsourcing, aided by currency benefit.

Average currency exchange rates during FY 2023 for the three major currencies are given below:

Currency Weightage (%) FY 2023 FY 2022 % Change YoY
USD 56.0 80.74 74.61 8.2
GBP 12.8 96.98 101.50 (4.5)
EUR 10.8 84.01 86.36 (2.7)

Movements in currency exchange rates through the year resulted in a positive impact of 3.9% on the reported revenue. The constant currency revenue growth for the year, which is the reported revenue growth stripped of the currency impact, was 13.7%.

Growth attributable to FY 2023 (%) FY 2022 (%)
Business growth 13.7 15.4
Impact of exchange rate 3.9 1.4
Total Growth 17.6 16.8

Segmental Performance

The revenue break-up by Industry Vertical and Geography is provided below:

Segment revenues, year on year growth, a brief commentary and segment margins are provided below:

Industry Vertical Segment Revenue FY 2023 (FY2022) ^ crore YoY

Revenue

Growth

%

Key Demand Drivers7 Segment Margin FY 2023 (FY 2022)

%

Banking, Financial 86,127 14.6 • AI for risk monitoring and management, fraud detection and 25.9
Services and

(75,126)

trading strategies.

(26.9)

Insurance • Customer journey transformation, ecosystem strategies for new products and services, connected insurance, fintech adoption.
• Decentralized finance, embedded finance, Banking as a Service, document custody transformation.
• Sustainability and climate change initiatives, green lending.
Communication, 37,653 18.1 • 5G and fiber rollout, network virtualization, cloud enablement, 28.3
Media and Technology

(31,874)

product, and platform engineering.

• AI-monitored networks, generative AI for automated content creation.

(29.9)

• Hyper-personalization, immersive experiences in gaming, recommendation engines.
Retail and 37,506 22.1 Retail and Consumer Packaged Goods (CPG): 25.7
Consumer Business

(30,715)

• Marketplace, social commerce, future stores, digital advertising platform, payments.

(27.8)

• Smart shelves, smart manufacturing, automated micro-fulfilment centers.
• Resilient and intelligent supply chain, partner integration, track and trace, last-mile delivery, AI enabled inventory management.
• Seamless and unified customer experience across channels

(omni-channel), hyper personalization, CX and recommendations, AI for apparel design and personalized fashion recommendations.

• Green labeling.
Travel, Transportation and Hospitality (TTH):
• Retailing in airlines, new distribution capability, experiential selling and non-booking revenues in hospitality, decision intelligence.
• Automation and self-service, touchless experience, digital

identity solutions, maintenance drones in airlines, autonomous vehicles, and robots in airports.

• Warehouse robotics, intelligent shipment planning, last mile delivery, real-time operations visibility, AI-enabled pricing, end- to-end shipment visibility in logistics.
• Safe and sustainable travel.

7 Only industry specific drivers are listed. In addition, every industry vertical saw demand for TCS services around IT estate rationalization, core platform simplification, application and data modernization, ERP modernization, cloud enablement, cloud migration, data democratization, data compliance and protection, IT infrastructure modernization, employee experience redesign, digital workplace transformation, cyber security, intelligent automation, business and IT operating model transformation, agile and DevOps adoption, digital marketing and analytics, mergers, acquisitions and divestitures, supply chain transformation, vendor consolidation and cost optimization.

Industry Vertical Segment Revenue FY 2023 (FY2022) ^ crore YoY

Revenue

Growth

%

Key Demand Drivers7 Segment Margin FY 2023 (FY 2022)

%

Life Sciences and Healthcare 24,605

(20,462)

20.2 Life Sciences:

• Drug discovery, virtual clinical trials, connected labs, and instruments.

28.0

(30.0)

• Digital twin for manufacturing and factory of the future.
• AI-led pharmacovigilance and product surveillance.
Healthcare:
• Patient experience, health data platforms.
• Wearable devices, mobile health.
• AI powered diagnosis, treatment planning, digital surgery, personalized medicine.
Manufacturing 21,236

(18,610)

14.1 • Integration across silos and digital twins for product innovation.

• Connected assets and plants, remote asset management.

• Resilient supply chain, parts track and trace.

• Front-end digital investments to enhance customer experience.

27.5

(30.1)

• Plant safety, energy efficiency and decarbonization, emission tracking and monitoring, sustainability focus on facilities waste management and energy, EVs.
Others 18,331

(14,967)

22.5 • Connected ecosystems for utilities, connected home, smart metering and alerts, virtual power plants, remote monitoring and infra inspection. 21.1

(20.6)

• AI-enabled smart grids, patterns, and predictions.
• Energy transition, emission detection and monitoring in critical infrastructure.

Business Outlook

Global growth is projected to moderate from 3.4 percent in 2022 to 2.8 percent in 20238 , weighed down by central banks raising interest rates to fight inflation, and Russias war in Ukraine. In major economies, the heightened risk of a recessior - made worse by a banking crisis - has led to uncertainty in enterprise decision-making, affecting spending on capex and certain discretionary programs.

Despite this, spending on IT services has been resilient so far. Cloud migration programs are continuing apace, and clients continue to launch new G&T projects. The higher level of uncertainty in the business environment has made clients more receptive to proactive proposals around IT and business operating model transformations that can not only deliver significant efficiencies but also help them become more agile and resilient. All this has resulted in a strong order book for

FY 2023, at $34.1 Bn, which is 1.2 times revenue. The pipeline has also grown well.

This provides visibility on medium-term growth amid nearterm uncertainty. If the delayed decision-making and cash conservation seen in some segments at the end of FY 2023 flows over into the first half of FY 2024, that could result in some moderation in full year revenue growth after two years of strong growth.

Key demand drivers expected to power the companys growth in FY 2024 include:

Technology transformation: IT infrastructure

modernization, cloud enablement, application and data estate modernization, cloud migration, data centre and collocated data support, digital workplace, digital twins, cyber security, ERP modernization, low-code no-code, 5G/ Edge and AI adoption.

G&T: Customer experience transformation using personalization, omnichannel implementation, immersive experiences using XR/Metaverse, product and business model innovation, supply chain modernization, M&A integration / divestitures, sustainability.

Operations: Traditional outsourcing, vendor consolidation and multi-services deals, AI/ML-led transformation of IT

/ business operations for greater resilience and leaner operating models, managed services models and real time operation visibility.

Enterprise Risk Management9

FY 2023 saw multiple external and internal challenges continuing to shape the overall risk profile of the company. Macroeconomic and geo-political risks had an impact throughout the year.

The Russia-Ukraine war and geo-political tensions, trade wars and imposed sanctions were pervasive and had direct and cascading impacts on economies and businesses. Shortages, rising inflation, supply-chain disruptions, energy crisis led to further uncertainties in the economic growth environment, with the year ending with banking industry upheavals in US and Europe. During the year, IT organizations including TCS faced the

knock-on effects of the pandemic including attrition and impact of hybrid modes of working. Technological advancements and breakthroughs like generative AI and metaverse have opened up new vistas of both risks and opportunities.

TCS continues to monitor this uncertain and dynamic business environment very closely and has strengthened the deployment of its Enterprise Risk Management framework to address the risks and leverage the associated opportunities. This framework enables risk identification, risk assessment, risk response planning and actions, risk monitoring and overall risk governance. Key risk indicators and control indicators are used to anticipate risks and assess effectiveness of their mitigation actions respectively.

TCS takes a holistic view of its enterprise risk profile, covering strategic, operational, compliance, financial and catastrophic risks, thus enabling informed decision-making. Risks are assessed and managed at various levels with a top-down and bottom-up approach across the enterprise, business units, geographies, business functions, customer relationships and individual projects.

Listed below are some of the key risks, anticipated impact on the company and mitigation strategies.

Key Risks (R)

/ Opportunity (O)

Impact on the Company In case of risk, approach to adapt or mitigate10 Financial implications of the risk or opportunity11
Volatile global political and economic environment

(R)

• Geo-politics and macroeconomic volatility can affect demand for the companys services. The ongoing Russia-Ukraine war has led to supply chain disruptions, energy crisis, food and merchandise scarcities and related inflation.

• Broad-based business mix, well diversified across geographies and industry verticals.

Negative

• Monitor changing geopolitical scenarios, the potential business implications and strengthen internal controls to further safeguard against secondary risks.
• Persistent high inflation in major economies could affect consumer spending and fuel social unrest. Repeated interest rate hikes by central banks to rein in the inflation could result in economic slowdowns. • Offerings and value propositions targeting all stakeholders (in addition to the CIO) in the customer organization, covering discretionary as well as non-discretionary spends, and relevant at every point in the business cycle.
• Continuing turmoil in the banking sector could affect not only spending in that sector, but also squeeze liquidity.

• Participate in the customers G&T initiatives

through services and offerings including advisory services, migration and modernization of applications and workplace transformation using location independent agile, deep contextual knowledge and data-driven analytics and dashboards.

• All of these could affect clients

business outlook and result in reduced demand for TCS services. It could also increase TCS costs of doing business.

• Where customers discretionary budgets are uncertain, focus on cost and optimization propositions in the short term to improve their business efficiency.

• In addition, there could be risks to service delivery, business continuity, cybersecurity, sanctions compliance and human rights risks in geopolitically sensitive zones, all of which could increase costs or affect the companys revenue growth.
• Proactively invest in infrastructure and resourcing to satisfy anticipated customer demand for flexible products and platforms- based solution offerings and subscription-based services to gain market share and new clients and markets.
• Enter into more long-term contracts.
• Target market segments which provide countercyclical support in times of downturn.
• Leverage business ecosystem through collaboration with partners, start-ups and alliances to participate in transformation initiatives of customers.
• Country-level business continuity plans in place to address potential conflicts in the region.
Talent risk due to huge demand for talent globally and attrition (R & O) • The companys ability to attract,

develop, motivate, and retain talent is critical to its business success.

• Commitment to organic talent development, best in class learning and development, career growth linkage to cross-skilling / upskilling, preference to internal talent for new leadership positions, all incentivize planning of longer-term careers in TCS and improved retention.

Negative

• Talent scarcity can lead to poaching of the companys employees and result in higher attrition. This can disrupt ongoing projects, slow down planned ramp ups and affect revenue growth.

• Tactical initiatives to retain talent using proactive as well as reactive initiatives.

• Inability to scale up experienced professionals with niche digital skills from the market, can also impact TCS ability to grow.

• Focused employee engagement to reduce attrition, increase sense of belonging and build capability to capture the demand from the market.
• Leverage top employer brand and social

networking sites and talent sourcing channels to tap into the passive pool.

• Reduce talent acquisition cycle time to improve joining rates through innovative practices.
• Engage in various markets through investments in STEM/goIT programs, campus engagements, local hiring and building reputation to attract local talent.
Opportunity:

• Proactive pitches to clients for operating model transformations leveraging AI and automation, or managed services models to enable tapping into global talent pools.

Positive

• Talent scarcity in major markets is impeding enterprises ability to staff projects, increasing the propensity to outsource.

• Commitment to organic talent development, best in class learning and development, career growth linkage to cross-skilling / upskilling, preference to internal talent for new leadership positions, all incentivize planning of longer-term careers in TCS and best in class talent retention.

• Superior talent retention by TCS can result in greater delivery certainty and therefore a differentiated positioning for the company, driving market share gains.
• Focused employee engagement to reduce attrition, increase sense of belonging and build capacity to capture market share.

• Higher level of industrialization, with robust processes and controls, and knowledge management reduces disruption due to attrition of individual team members, and helps differentiate TCS.

Restrictions on global mobility, location strategies (R)

• Distributed software development models require the free movement of people across countries and any restrictions in key markets pose a threat to the global mobility of skilled professionals.

• Restrictions could also be due to legislations which limit / delay the availability of work visas or which apply onerous eligibility criteria or costs, leading to project delays and increased expenses.

• Ongoing monitoring of the global environment, working with advisors, partners and governments to promote local talent building efforts.

• Material reduction in dependency on work visas through increased local hiring, use of contractors, local mobility and training in all major markets.

• Leveraging the SBWSTM model to deliver from anywhere. Use of Location Independent Agile to promote systematic collaboration and reduce the need for co-location.

• Active engagement in Science, Technology, Engineering and Math (STEM) initiatives designed to structurally increase the availability of engineering talent in major markets.

• Greater brand visibility through event sponsorships, community outreach, showcasing of investments, innovation capabilities and employment generation.

• Increased outreach to government stakeholders, trade bodies, think tanks and research institutes.

Negative

Business model changes in customer enviroment (R & O)

• Rapidly evolving technologies are changing technology consumption patterns, creating new classes

of buyers within the enterprise, giving rise to entirely new business models and therefore new kinds of competitors.

• High levels of economic uncertainty can result in clients recalibrating their IT programs and pulling back their spending on discretionary projects.

• Increased focus on corporate restructuring and mergers and acquisitions in some industries is driving vendor consolidation, insourcing and cost reduction pressures.

• These changes require agile responses. Inability to quickly adapt could affect companys competitiveness and result in loss of market share.

• Investments in innovation and differentiated capabilities at scale on emerging technologies through large scale reskilling, external hiring, research and innovation, solution development and IP asset creation leveraging deep contextual knowledge across customer specific domain, technologies and processes.

• Dedicated business service units providing end-to-end transformational and operational solutions on leading cloud platforms spanning advisory, migration and modernization and support of applications.

• Constantly scouring the technology landscape using strong partnerships with clients, technology providers, academia, and start-ups, to spot new trends, technologies and potential threats, invest early in building capabilities

to mitigate risks and participate in the opportunities.

Negative

Key Risks (R)

/ Opportunity (O)

Impact on the Company In case of risk, approach to adapt or mitigate10 Financial implications of the risk or opportunity11

Opportunity:

• Increased focus on corporate restructuring and mergers and acquisitions in some industries is creating new opportunities for IT separations and integrations.

• Interest in technology-enabled business model innovation has opened up opportunities for the company to participate in clients growth and transformation spending.

• Pressure to establish competitive differentiation is driving enterprises to look for partners to speed up and scale up their innovation efforts.

• This is also driving greater interest in pre-built solutions, products and platforms that can accelerate the deployment of transformational solutions.

• The quest for cost efficiency along with greater resilience and agility in operations is expanding the opportunity for comprehensive operating model transformations.

• Steadily expanding coverage of newer buyers in the enterprise by constantly launching new offerings and solutions to their most pressing business problems.

• Innovative offerings like operating model transformations using TCS Cognix to help deliver significant cost savings quickly, Location Independent Agile methods to mitigate location constraints and pricing and margin pressures.

• An entrepreneurial mindset, a decentralized decision-making which empowers frontline managers to take decisions, and an organization structure that enables the company to adapt

to constantly evolving situations on the ground with agility and speed.

• Differentiated solutions for organization divestiture and integration, catering to M&A- induced demand for advisory and business consolidation related services.

• Large portfolio of IP made available on hyperscaler clouds to accelerate clients Horizon 2 and 3 transformation journeys.

• PacePort co-innovation hubs, Agile innovation cloud framework, and extended innovation ecosystem including partners and start-ups to help clients accelerate their product and business model innovation.

• Bringing Life to Things framework to help clients create connected products, launch remote monitoring and maintenance services.

• Solutions like TCS HOBS and Servitization engine to help clients embrace subscription-based business models.

• Focused investments to expand presence in clients growth and transformation spending, including programs like Contextual Masters to build organizational capacity, new brand tagline, amplification of transformation successes.

• Platform-based business models and AI-based operating models to disrupt conventional labor arbitrage based constructs, and gain market share.

Positive

Currency volatility (R) • Volatility in currency exchange movements results in transaction and translation exposure. TCS functional currency is the Indian Rupee. Appreciation of the Rupee against any major currency could impact the reported revenue in Rupee terms, the profitability and also result in collection losses.

• Conversely, depreciation could optically inflate revenues and earnings, distorting stakeholder perceptions of the underlying business momentum and profitability.

• Currency hedging policy that is aligned with market best practices, to limit impact of short term exchange volatility on receivables, forecasted revenue and other current assets and liabilities.

• Hedging strategies guided and monitored periodically by the Risk Management Committee of the Board.

• Management commentary based on constant currency figures to enable a currency-neutral understanding of business growth.

Negative / Positive
Breach of data protection laws (R)

• The focus on data privacy and protection of personal data has increased compliance risk.

• Legislations like GDPR in Europe carry severe consequences for non-compliance or breach. Many other countries have enacted or are enacting their Data Privacy regulations to ensure protection of personal data.

• Violation of data protection laws or security breaches can result in substantive liabilities, fines or penalties and reputational impact.

• Global privacy policy covering all geographies, all areas of operations, and stakeholders, which sets out the privacy principles and guidance for deployment.

• Organization structure with the Global Privacy Office to strategize, monitor and guide deployment of data privacy framework across the enterprise. Data Protection Officers and other privacy officers have been appointed for TCS entities as required by local privacy regulations to monitor and drive implementation of data protection principles. Business Privacy Leaders are appointed to deploy compliance to the data privacy framework in all functions and business units.

• Unified global framework PrivACE adopted across all entities and branches to standardize privacy practices while catering to local requirements.

• Continuous monitoring and analysis of changes to regulatory and legal landscape and enhancing the data privacy framework.

• Privacy Information Management Systems (ISO 27701:2019) adopted and certified.

• Embedded privacy by design and privacy by default principles in development of new or changed internal processes, services and products.

• Data protection controls and robust risk response mechanisms to protect personal data in the TCS ecosystem and also in customer engagements.

• Industry standard data masking and encryption technologies to protect personal data.

Negative

Key Risks (R)

/ Opportunity (O)

Impact on the Company In case of risk, approach to adapt or mitigate10 Financial implications of the risk or opportunity11
• Vendors and third parties subjected to due diligence, contracted with appropriate privacy obligations and tracked for compliance based on risk assessment.

• Mandatory trainings and workshops on data protection, Privacy by Design and global privacy regulations. Continuous awareness campaigns through blog posts, email broadcasts, gamification, roadshows and online events.

• Risk assessments related to cross border transfers and maintaining data transfer agreements, where required for the transfer of data across jurisdictions.

• Periodic reviews and audits by independent audit firm to verify compliance to obligations in addition to internal audits across the ecosystem.

Cyber Attacks (R & O)

Risks of cyber-attacks are on the rise due to the fast-evolving nature of the threat. There is also an increased risk due to various pandemic themed cyber threats and attacks due to geo-political drivers.

In addition to impact on business operations, a security breach could result in reputational damage, penalties and legal and financial liabilities.

• Use of advanced tools based on AI/ML to prevent and detect incursions with quarantine capabilities, including perimeter security controls with advanced tools, enhanced internal vulnerability detection, data leak prevention tools, defined and tested incident management and recovery process in compliance with industry best practices.

• Continued reinforcement of stringent security policies and procedures (certified against ISO 27001) including enhanced security measures and awareness building to combat phishing attempts and soliciting for fraudulent causes or charities through social media, text or calls.

• Close collaboration with Computer Emergency Response Team (CERT) and other private cyber intelligence agencies, and enhanced awareness of emerging cyber threats.

• Enterprise-wide training and awareness programs on Information Security including the extensively used enterprise-wide communication and collaboration platforms accessed through mobile or desktop channels.

• Strict access controls including non-persistent passwords (OTP) for secure access to enterprise applications/network, special handling of privileged administrator accounts, rigorous access management on all cloud deployments.

• Encryption of data, data back-up and recovery mechanisms for ensuring business continuity.

Negative

Key Risks (R)

/ Opportunity (O)

Impact on the Company In case of risk, approach to adapt or mitigate10 Financial implications of the risk or opportunity11
• Ability to isolate TCS enterprise network from client network and defined escalation mechanisms to handle security incidents in client environment.

• Periodic rigorous testing to validate effectiveness of controls through vulnerability assessment and penetration testing.

• Internal and external audits, red teaming,

"breach and attack" simulation.

• Sourcing threat intelligence from various government, public and private sources to proactively block IPs used by threat actors.

• State of the art security operations center with automated playbooks.

Opportunity:

• Enterprises are increasing their investments in building cyber resilience and turning to specialized third parties to be detect and foil intrusion attempts and limit the impact.

• This presents a fast growing business opportunity for TCS to become the preferred cyber security partner to its clients.

• Investments in building local threat management centers across the world.

• Launch of new services and solutions including the Cyber Defense Suite.

Positive
Noncompliance to complex and changing global regulations (R)

• As a global organization, the company has to comply with complex regulatory requirements across multiple jurisdictions, covering across a

broad range of areas grouped under environmental, social and governance themes.

• The fast pace and complex nature of changes in the regulatory requirements requires quick identification and sound understanding of these requirements along with agility in adaptation in business operations. Failure to comply could result in penalties, reputational damage and criminal prosecution.

• Deployment of a comprehensive global compliance management framework that enables tracking of regulatory changes across various jurisdictions, including new countries of operations and functional areas and management of compliance risks.

• In-house digitized regulatory compliance platform enabling clear accountability, tracking of compliance obligations and governance to ensure long-term business sustainability.

• Operationalized regulatory requirements through business policies and embedding into business processes.

• 100% digitized, quarterly regulatory compliance declarations enabling self-governance of all compliance areas applicable to companys global operations.

• Up to date, effective internal controls to comply with regulations, keep a check on unlawful

and fraudulent activities and internal audits to provide compliance assurance.

Negative

• Strong focus on fostering ethical and compliance culture; awareness through web-based compliance training courses for all staff and regular notifications/alerts on regulatory changes communicated to stakeholders.

• Strong governance at board, executive and management levels through compliance committees and compliance working groups.

Intellectual Property (IP) infringement and leakage (R)

• Risk of infringement of IP of third parties including suppliers, partners and alliance organizations by TCS may lead to potential liabilities, increased litigation and impact reputation.

• Inadequate protection of TCS IP may lead to potential loss of ownership rights, revenue and value.

• Establishment of an industry leading IP management framework (IP 4.0) with institutionalized frameworks, processes and procedures that address the risk of infringement of third-party IP while ensuring safeguarding of TCS own IP assets.

• Establishment of a centralized IP and Software Product Engineering group that strives to build an IP-led culture and IP related awareness effectively.

• Well-defined (software) asset lifecycle governance framework that incorporates policy guidance and risk mitigation guidelines on IP, legal, software product engineering and business-related risks.

• IP governance program that ensures that there is right access and right use of TCS IP, customer IP, partner IP, and third-party IP in service and partner engagements.

• Other key controls include employee confidentiality agreement, training and awareness for IP protection and prevention of IP contamination and infringement. Digitized system to enable strict controls around movement of people and information across TCS product teams and customer account teams.

Negative

Litigation risks (R) • Litigation risks might arise from commercial disputes, perceived violation of intellectual property rights/trade secret violations and employment related matters.

• The companys rising profile and scale also makes it an attractive target to meritless lawsuits.

• Besides the distraction and legal expense, litigations garner negative media attention and pose reputation risk. Adverse rulings can result in substantive damages.

• Strengthening internal processes and controls to adequately ensure compliance with contractual obligations, information security and compliance with IP policies and procedures for protection

of intellectual property and avoidance of allegations of trade secret violations.

• Improved governance and controls over immigration process /increasing localization and inclusion of arbitration provisions in employment contracts.

• Training and sensitization of business managers to spot the risks, adhere to best practices

and escalate potential disputes within the organization for early mitigation steps.

Negative
• Team of in-house counsels in all major geographies and a network of reputed global law firms in countries it operates in.

• Robust mechanism to track and respond to notices as well as defend the companys position in all claims and litigation.

Sustainability Risks- Climate change and Environmental aspects (R & O)12

• Extreme weather events due to climate change pose a threat to human safety and can cause business disruptions.

• With globally distributed operations, the company faces physical risks to life and property due to extreme weather events, transition risks resulting from disruptions in the market and emerging regulations, disruptions

to operations due to water scarcity, risks of inadvertent non-compliance to emerging regulatory requirements around circular economy, e-waste and solid waste regulations, impacting health and safety in local communities, business disruption and reputational damage. All of these could affect TCS growth and profitability.

• An environmentally sustainable approach through green policies, processes, frameworks and infrastructure, on target to achieve net zero carbon emissions by 2030.

• Delivery centers designed to withstand extreme weather events. Business continuity plans are tested periodically to ensure effectiveness.

• Green buildings, efficient operations, green IT, greater use of renewable energy to reduce carbon footprint; adoption of newer technologies and methods to manage waste in line with circular economy principles.

• Operational and engineering controls to minimize freshwater consumption, upgradation of water infrastructure and more water efficient systems.

• Water management through sewage treatment, recycling of treated water and rainwater harvesting.

• Supply chain sustainability through responsible sourcing, including leveraging sustainability ratings platform.

• Year-round employee engagement on environmental awareness and sensitizing them towards nature and conservation of resources.

• Initiatives like TCS Circle4Llife™ and Sustainathons to come up with technology-led innovations to safeguard TCS environment.

Negative

Opportunity:

• As enterprises look to reduce their own carbon footprint and cater

to the growing demand more environmentally friendly products and services, it opens up new business opportunities for TCS to provide technology-led solutions to help them realize their green plans.

• Proactive measures taken by TCS to reduce its environmental footprint strengthens the brand and makes it attractive to enterprises looking for an IT partner with a shared purpose. It also helps attract and retain younger, more purpose-driven employees.

• Dedicated business units for each of the large hyperscaler providers, helping clients migrate their workloads from owned data centers to the cloud, thereby reducing the carbon footprint associated with those workloads.

• Steadily expanding suite of sustainability services including designing sustainability strategy, sustainability innovation, sustainable consumer analytics and sustainability dashboards.

• Build and promote TCS products and solutions such as TCS Clever Energy™, Envirozone™,

ESG integration solution, to help accelerate customers sustainability journeys.

Positive
Challenges and Opportunities with Disruptive Technologies (R & O)

Disruptive cutting-edge technologies like quantum computing, generative AI and large language models and metaverse could impact TCS business:

• Quantum computing may increase exposure to cyberattacks because existing security infrastructure may prove inadequate.

• Generative AI, large language models and metaverse could lead to legal liabilities through plagiarism, deep fakes and privacy and copyright infringement issues.

• The efficacy of AI models depends on the quality of the data they are trained on. Unless specifically designed to prevent such outcomes, the models could be vitiated by all kinds of human biases contained in large data sets, and produce outcomes that cause reputational damage and legal liabilities.

• Generative AI technologies could disrupt software development and testing activities, distorting customer expectations in the short term.

• Ensure controlled use of these technologies through pilots/research.

• Restricted access to generative AI technologies like ChatGPT on company network until proven safe.

• Work with government bodies, regulators and academia to build consensus about policies and guidelines for use of these technologies.

• Embark on large-scale skilling of employees to prepare for deployment on market-oriented products and services based on these technologies.

• Participate as a member of industry specific large language models consortia.

Negative

Opportunity:

• Generative AI technologies also have the potential to reimagine existing products and services and can also open up opportunities in form of new solutions using those technologies, and new services needing newer kinds of skills.

• Proactively invest in research around embedding generative AI capabilities into software development processes to boost productivity.

• Develop niche skills to tap demand created for Post Quantum cryptography services as customers seek Quantum safe security algorithms.

• Leverage opportunities to market TCS own generative AI tools and services as overall attention and adoption of the technology increases.

Positive

Internal Financial Control Systems and their Adequacy

TCS has aligned its current systems of internal financial control with the requirement of Companies Act, 2013, on the lines of the globally accepted risk-based framework issued by the Committee of Sponsoring Organizations (COSO) of the Treadway Commission. The Internal Control - Integrated Framework (the 2013 framework) is intended to increase transparency and accountability in an organizations process of designing and implementing a system of internal control. The framework requires a company to identify and analyze risks and manage appropriate responses. The company has successfully laid down the framework and ensured its effectiveness.

TCS internal controls are commensurate with its size and the nature of its operations. These have been designed to provide reasonable assurance with regard to recording and providing reliable financial and operational information, complying with applicable statutes, safeguarding assets from unauthorized use, executing transactions with proper authorization and ensuring compliance with corporate policies. TCS has a well-defined delegation of power with authority limits for approving contracts as well as expenditure. Processes for formulating and reviewing annual and long-term business plans have been laid down.

TCS uses a state-of-the-art enterprise resource planning (ERP) system that connects all parts of the organization, to record data for accounting, consolidation and management information purposes. It has continued its efforts to align all its processes and controls with global best practices.

TCS management assessed the effectiveness of the companys internal control over financial reporting (as defined in Regulation 17 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (SEBI LODR) as of March 31, 2023.

B S R & Co. LLP, the statutory auditors of TCS have audited the financial statements included in this annual report and have issued an attestation report on the companys internal control over financial reporting (as defined in section 143 of Companies Act, 2013).

TCS has appointed PricewaterhouseCoopers Services LLP (PwC) LLP to oversee and carry out internal audit of its activities. The audit is based on an internal audit plan, which is reviewed each year in consultation with the statutory auditors and approved by the Audit Committee. In line with international practice, the conduct of internal audit is oriented towards the review of internal controls and risks in the companys operations such as software delivery, accounting and finance, procurement, employee engagement, travel, insurance, IT processes, including the subsidiaries and foreign branches.

TCS also undergoes periodic audit by specialized third party consultants and professionals for business specific compliances such as quality management, service management, information security, etc. The Audit Committee reviews reports submitted by the management and audit reports submitted by internal auditors and statutory auditors. Suggestions for improvement are considered and the audit committee follows up on corrective action. The audit committee also meets TCS statutory auditors to ascertain, inter alia, their views on the adequacy of internal control systems and keeps the board of directors informed of its major observations periodically.

Based on its evaluation (as defined in section 177 of Companies Act 2013 and Regulation 18 of SEBI LODR), TCS Audit Committee has concluded that, as of March 31, 2023, the companys internal financial controls were adequate and operating effectively.

Performance Trend - 10 years

Ind AS ndian GAAI
FY 2023 FY 2022 FY 2021* FY 2021 FY 2020 FY 2019 FY 2018 FY 2017 FY 2016 FY 2015# FY 2015 FY 2014
Revenue from operations
Total revenue from operations 225,458 191,754 164,177 164,177 156,949 146,463 123,104 117,966 108,646 94,648 94,648 81,809
Revenue by geographic segments
Americas 124,336 100,072 84,278 84,278 82,000 77,562 66,145 66,091 60,011 51,053 51,053 45,259
Europe 67,436 61,142 52,346 52,346 48,037 43,456 34,155 30,038 29,092 26,730 26,730 23,433
India 11,271 9,805 8,449 8,449 8,964 8,393 7,921 7,415 6,729 6,108 6,108 5,488
Others 22,415 20,735 19,104 19,104 17,948 17,052 14,883 14,422 12,814 10,757 10,757 7,629
Cost
Employee cost 127,522 107,554 91,814 91,814 85,952 78,246 66,396 61,621 55,348 48,296 50,924 40,486
Other operating cost 38,677 31,143 25,817 27,035 28,888 28,711 24,192 24,034 22,621 19,242 19,242 16,170
Total cost (excluding interest & depreciation) 166,199 138,697 117,631 118,849 114,840 106,957 90,588 85,655 77,969 67,538 70,166 56,656
Profitability
EBITDA (before other income) 59,259 53,057 46,546 45,328 42,109 39,506 32,516 32,311 30,677 27,110 24,482 25,153
Profit before tax 56,907 51,687 44,978 43,760 42,248 41,563 34,092 34,513 31,840 28,437 25,809 25,402
Profit after tax attributable to shareholders of the Company 42,147 38,327 33,388 32,430 32,340 31,472 25,826 26,289 24,270 21,912 19,852 19,164
Financial Position
Equity share capital 366 366 370 370 375 375 191 197 197 196 196 196
Reserves and surplus 90,058 88,773 87,014 86,063 83,751 89,071 84,937 86,017 70,875 52,499 50,439 48,999
Gross block of property, plant and equipment 32,344 30,300 28,658 28,658 26,444 24,522 22,720 20,891 19,308 16,624 16,624 13,162
Total investments 37,163 30,485 29,373 29,373 26,356 29,330 36,008 41,980 22,822 1,662 1,662 3,434
Net current assets 66,712 65,959 66,076 65,125 63,177 70,047 63,396 65,804 47,644 30,726 28,495 27,227
Earnings per share in ?
EPS- as reported 115.19 103.62 89.27 86.71 86.19 83.05 134.19 133.41 123.18 111.87 101.35 97.67
EPS- adjusted for Bonus Issue 115.19 103.62 89.27 86.71 86.19 83.05 67.10 66.71 61.59 55.94 50.68 48.84
Headcount (number)
Headcount (including subsidiaries) as on March 31st 614,795 592,195 488,649 488,649 448,464 424,285 394,998 387,223 353,843 319,656 319,656 300,464

Overview of Funds Invested

Funds invested exclude earmarked balances with banks and equity shares measured at fair value through other comprehensive income.

( Crore)

FY 2023 FY 2022 FY 2023 FY 2022 FY 2023 FY 2022

Current

Non-current

Total funds invested

Investments in mutual funds, Government

36,897

30,262

230

187

37,127

30,449

securities and others
Deposits with banks 8,223 15,784 1,334 1,232 9,557 17,016
Inter-corporate deposits 846 6,074 170 303 1,016 6,377
Cash and bank balances 2,124 2,211 - - 2,124 2,211
Total 48,090 54,331 1,734 1,722 49,824 56,053

Total invested funds include ?2,080 crore and ?1,722 crore for FY 2023 and FY 2022, respectively, pertaining to trusts and TCS Foundation held for specified purposes.

Ratio Analysis - 10 years

Ind As

Indian GAAP

Unit FY

2023

FY

2022

FY

2021*

FY

2021

FY

2020

FY

2019

FY

2018

FY

2017

FY

2016

FY

2015#

FY

2015

FY

2014

Ratios - Financial Performance
Employee Cost / Total Revenue % 56.6 56.1 55.9 55.9 54.8 53.4 53.9 52.2 50.9 51.0 53.8 49.5
Other Operating Cost / Total Revenue % 17.1 16.2 15.7 16.5 18.4 19.6 19.7 20.4 20.9 20.4 20.3 19.8
Total cost (excluding interest & depreciation) / Total Revenue % 73.7 72.3 71.6 72.4 73.2 73.0 73.6 72.6 71.8 71.4 74.1 69.3
EBITDA (Before Other Income) / Total Revenue % 26.3 27.7 28.4 27.6 26.8 27.0 26.4 27.4 28.2 28.6 25.9 30.7
Profit Before Tax / Total Revenue % 25.2 27.0 27.4 26.7 26.9 28.4 27.7 29.3 29.3 30.0 27.3 31.1
Tax / Total Revenue % 6.5 6.9 7.0 6.8 6.2 6.8 6.7 6.9 6.9 7.2 6.6 7.4
Effective Tax Rate - Tax / PBT % 25.7 25.6 25.5 25.6 23.2 24.1 24.1 23.6 23.6 23.5 23.7 23.9
Profit After Tax / Total Revenue % 18.7 20.0 20.3 19.8 20.6 21.5 21.0 22.3 22.3 23.2 21.0 23.4
Ratios - Growth
Total Revenue % 17.6 16.8 4.6 4.6 7.2 19.0 4.4 8.6 14.8 15.7 15.7 29.9
EBITDA (Before Other Income) % 11.7 14.0 10.5 7.6 6.6 21.5 0.6 5.3 25.3 7.8 (2.7) 39.4
Profit After Tax % 10.0 14.8 3.2 0.3 2.8 21.9 (1.8) 8.3 22.3 14.3 3.6 37.7
Ratios - Balance Sheet
Debt (excluding lease liabilities) - Equity Ratio Times - - - - - - 0.0 0.0 0.0 0.0 0.0 0.0
Current Ratio Times 2.5 2.6 3.0 2.9 3.3 4.2 4.6 5.5 4.1 3.9 2.4 2.7
Days Sales Outstanding (DSO) in terms Days 67 65 67 67 71 68 74 70 81 79 79 81
Days Sales Outstanding (DSO) in $ terms Days 65 64 68 68 67 69 74 73 80 78 78 82
Invested Funds / Capital Employed % 50.4 57.4 52.6 53.1 47.7 55.2 55.6 55.8 45.8 42.3 43.9 44.0
Capital Expenditure / Total Revenue % 1.4 1.5 1.9 1.9 2.0 1.5 1.5 1.7 1.8 3.1 3.1 3.8

 

Ind As

Indian GAAP

Unit FY

2023

FY

2022

FY

2021*

FY

2021

FY

2020

FY

2019

FY

2018

FY

2017

FY

2016

FY

2015#

FY

2015

FY

2014

Operating Cash Flows / Total Revenue % 18.6 20.8 23.6 23.6 20.6 19.5 20.4 21.4 17.6 20.5 20.5 18.0
Free Cash Flow / Operating Cash Flow Ratio % 92.7 92.6 91.9 91.9 90.5 92.5 92.8 92.3 89.7 84.8 84.8 78.9
Depreciation of Property, Plant and Equipment / Average Gross Block of Property, Plant and Equipment % 9.2 9.1 8.7 8.7 8.6 8.5 9.1 9.5 10.0 11.7 11.7 10.6
Ratios - Per Share
EPS- adjusted for Bonus 115.19 103.62 89.27 86.71 86.19 83.05 67.10 66.71 61.59 55.94 50.68 48.84
Price Earnings Ratio, end of year Times 27.8 36.1 35.6 36.6 21.2 24.1 21.2 18.2 20.4 22.8 25.1 21.8
Dividend Per Share 115.00 43.00 38.00 38.00 73.00 30.00 50.00 47.00 43.50 79.00 79.00 32.00
Dividend Per Share- adjusted for Bonus 115.00 43.00 38.00 38.00 73.00 30.00 25.00 23.50 21.75 39.50 39.50 16.00
Market Capitalization / Total Revenue Times 5.2 7.1 7.2 7.2 4.4 5.1 4.4 4.1 4.6 5.3 5.3 5.1