Please note that this conference is being recorded. I now hand the conference over to Ms. Nehal Shah from the Investor Relations team at TCS. Thank you, and over to you.
Thank you, operator. Good evening, and welcome, everyone. Thank you for joining us today to discuss TCS's financial results for the fourth quarter and full year financial year 2024 that ended March 31, 2024. 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 releases are also available on our website. Our leadership team is present on this call to discuss our results. We have with us today Mr. K. Krithivasan, Chief Executive Officer and Managing Director.
Hello, everyone.
Mr. N.G. Subramaniam, Chief Operating Officer and Executive Director.
Good evening to you.
Mr. Samir Seksaria, Chief Financial Officer.
Hello.
Mr. Milind Lakkad, Chief HR Officer.
Yeah. Hi, everyone.
Our management team will give a brief overview of the company's performance, followed by a Q&A session. As you are aware, we don't provide specific revenue or earnings guidance, and anything said on this call which reflect our outlook for 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 second slide of the quarterly fact sheet available on our website and emailed out to those who have subscribed on our mailing list. With that, I would like to turn the call over to Krithi.
Thank you, Nehal. Good day, everyone. I am pleased to share that, we are wrapping up the last quarter of financial year 2024 with the strongest sequential revenue growth in many quarters and all-time high TCV, and an operating margin of 26% for the quarter, highest in the last 12 quarters. Our financial year 2024 revenue grew at 6.8% in rupee terms, 3.4% in constant currency terms, and 4.1% in dollar terms. Our operating margin for the year came in at 24.6%, and net margin was at 19.3%. Our ability to maximize market opportunities is evident in our record Q4 TCV of $13.2 billion.
We are seeing solid deal momentum across markets, resulting in strong double-digit growth in our last 12 months TCV, which is a reflection of our deepening partnership with our clients. This is going to be NGS' last quarter with all of us. I want to thank NGS, with whom I have worked closely for more than three decades. I witnessed firsthand the tremendous impact he has made on TCS over a 42-year-long career, working side by side with him and our entire leadership team on every aspect of our strategy and operations. NGS played a key role in developing and executing our growth strategy, especially our products and platform business, positioning us very well for continued market leadership. He has played a strategic role in several landmark projects that TCS undertook across geographies, most recently in BSNL being one. We'll miss him in his executive capacity very much.
I now invite Samir, Milind, and NGS to go over different aspects of our performance during the quarter. I'll step in later to provide more color on the demand trends we are seeing. Over to you, Samir.
Thank you, Krithi. Good day, everyone. In the fourth quarter of FY 2024, our revenue grew 2.2% year-on-year in constant currency terms at INR 61,237 crore. This translates to a growth of 3.5% in rupee terms. In dollar terms, the revenue was $7.36 billion, a YOY growth of 2.3%. For the full year, our revenue grew 3.4% YOY in constant currency at INR 240,893 crore, and that translates to a growth of 6.8% in rupee terms. In dollar terms, our revenue were at $29.1 billion, a YOY growth of 4.1%. Our operating margin stood at 26%, a sequential expansion of 100 basis points.
This was in spite of 90 basis points due to higher third-party costs and travel expenses, offset by 190 basis points improvement from reduced subcontractor costs, improved productivity, and better utilization. Our FY 2024 operating margin was at 24.6%, an expansion of 50 basis points over the prior year. During the year, we had 250 basis points headwind on account of annual wage increases and other interventions, and a further 90 basis points on, from higher third-party expenses and discretionary expenses. We were able to successfully mitigate those by optimizing subcontractor expenses, improving productivity, realization, and support from currency. Net margins in Q4 was 20.3%, and for the full year was 19.3%. Our annual EPS grew 10.9% during the year.
Our effective tax rate for the year was 25.8%. Please note that, all the full year FY 2024 numbers are adjusted for the settlement of legal claim, which was accounted for in Q3. Our accounts receivable was at 67 days DSO in dollar terms, flat sequentially. Our cash conversion continues to be strong and over 100% of our net profits. Invested funds at the end of March stood at INR 46,963 crores. The board has recommended a final dividend of INR 28 per share. The shareholders' payout year till date were INR 46,223 crores, including the buyback and dividends. Over to you, Milind. Thank you, Samir.
Our workforce at the end of the fourth quarter was 601,546. Our LTM attrition in IT services kept trending down throughout the year and was at 12.5% at the end of Q4, down eighty basis points sequentially, and in our comfort range of 11%-13%. This has been recognized as a global top employer. TCS has been recognized as a global top employer by the Top Employers Institute for the ninth consecutive year. The global certification follows a series of localized certifications, with TCS being named the top employer in 32 countries and regions. 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.
We have commenced fresher hiring from campuses and continue to recalibrate our lateral hiring, focusing more on utilizing the capacity that we have built over the prior years. TCS organic talent development initiatives have continued to deliver industry-leading outcomes. Employees logged 51 million learning hours during the year and acquired 5 million competencies. In FY 2024, several key initiatives were launched to inculcate a strong engineering culture among the company associates, build deeper skills in market-relevant technologies, and create an AI-ready workforce. As we have done consistently every year, we have announced a salary increment for all our employees with effect from April 1, similar in quantum to prior years, with top performers receiving double-digit hikes. Over to you, NGS, for some color on our segments and products and platforms.
Thank you, Milind. Good evening to all of you. As Krithi mentioned, I'll be superannuating from TCS in a few weeks. I've thoroughly enjoyed, and it's been an absolute honor interacting with all of you over this forum, and I always have looked forward to your reports, and all our interactions and the reports have only made me better. Thank you so much. Let me walk you through our segmental performance now. As a reminder, all growth numbers are in on year-on-year constant currency terms. In Q4, growth was led by regional markets, which grew 26%. Manufacturing vertical grew by 9.7%. Energy, Resources, and Utilities grew by 7.3%. Life Sciences and Healthcare grew by 1.7%.
Our Consumer Business Group declined by 0.3%. However, it returned to positive sequential growth in Q4. Banking, Financial Services, and Insurance declined by 3.2%, but saw a return of growth in the insurance business across all markets during the quarter. CMI declined by 5.5%, and Technology and Services declined by 5.6%. Among major markets, the United Kingdom led with 6.2% growth. Continental Europe declined by 2.2%. North America declined 2.3%. In emerging markets, India led with 38% growth, Middle East and Africa grew by 11%, Latin America grew by 10%, and Asia Pacific grew by 5.2%. Let me move on to our products and platforms. Our industry-leading portfolio of products and platforms saw good traction during the quarter.
ignio, our cognitive automation software suite, saw 32 new deal wins and six go-lives. TCS BaNCS, our flagship product for financial services, had eight new wins and seven go-lives during the quarter. Central Bank, a leading Midwest regional bank in North America, selected our core banking and payments modernization platform. The solution will come pre-integrated with core banking and payments, an ISO 20022-ready solution, enabling the bank to offer FedNow Services and RTP by the clearing house. TCS BaNCS insurance platform continues to see strong growth in Q4, with two wins and two go-lives during the quarter. Aviva, UK's leading insurance, wealth, and retirement provider, expanded on the existing relationship with TCS for a 15-year deal to transform its life business and enhance customer experience, leveraging the TCS BaNCS digital platform.
As part of this, the end-to-end policy administration and servicing will expand to cover an additional 5.5 million policies to be managed by Diligenta, our FCA-regulated subsidiary in the UK. Quartz blockchain platform had three wins during this quarter. In life sciences, advanced drug development platform had one new win and two go-lives during the quarter. Gen AI is a potential game changer in identifying probable drug candidates, optimizing trials, harnessing vast pools of dissimilar clinical data, capturing and processing efficacy and safety data. There are many such Gen AI use cases where pharma companies are investing. TCS ADD platform is actively working on POCs on Gen AI across multiple innovative use cases, including structure insights, patient insights, safety case processing, and medical writing. TCS Optumera, our AI-powered merchandising optimization suite, had one new win in Q4.
A Dutch retail client of ours has transformed its pricing strategies in their 800 Netherlands stores for the last seven years with TCS Optumera, fulfilling their promise of providing high quality at low price. Our product will now drive their pricing initiatives in Belgium. That will help them improve usability, provide flexibility in pricing, and help maintain consistent pricing position. TCS iON. Our platforms for digital assessment, exam administration, and learning had 22 new wins and 80+ go-lives. Our assessment platform administered examinations for 13.9 million candidates. Our platform now offers GenAI-powered content creation and text translation in Indian regional languages, improved security in question paper creation, with restrictions in editing, overwriting media images, and creating duplicate subject codes and names, audio-based marking with noise suppression and dual recording capabilities. TCS TwinX, our digital twin solution, had two wins and two go-lives.
MasterCraft and Jile won 29 new clients in Q4. Let me now go over the client metrics. As you are aware, our customer-centric business strategy enhances our ability to continually expand and deepen our client relationships. These metrics provide a measure of our progress in the journey and the validation of our strategy. In Q4, we added two more clients year-on-year in the $100 million plus band, bringing the total to 62. Six more clients in the $50 million plus band, bringing the total to 139. 10 more new clients in the $20 million plus, bringing the total to 301. 26 more clients in $10 million dollars band, bringing the total to 487.
28 more clients in the $5 million plus band, bringing the total to 693, and 53 more clients in the $1 million plus band, bringing the total to 1,294. I will now request Krithi to speak on the demand drivers during the quarter.
Thank you, NGS. As we review the last year's performance, TCS has once again proved its adaptability and relevance to customers. By working closely with them and utilizing our contextual knowledge, we proactively identify solutions to their industry-specific challenges, leading to significant deal wins and market share gains for us. Our growth remains resilient amidst macro uncertainties and geopolitical volatilities. During Q4, customers continued to reprioritize spend and projects where return on investment was high and immediate. Several key engagement themes, which are priorities for enterprises, include operating model transformation, vendor consolidation, cloud transformation, AI enablement, that is cloud and data foundation for AI, customer and employee experience enhancement, business process optimization, sustainability, and early-stage AI-infused transformational engagements. We continue to see pressure on customers' discretionary spend.
At the same time, transformation also remains a key ask, and customers are expecting the same to be funded through savings from operations. For the BFSI vertical, 2023 was a year of resilience, balancing the challenges due to inflation and complex geopolitics against the initial benefits from rising interest rates. In 2024, while evolving regulation, transforming technologies like generative AI, cybersecurity, embedded finance, and green transition have become the constant driving change, businesses are going to be focused on innovation, driving their plans, and building new business models for the future that will unravel tremendous growth potential. We continue to see pent-up demand in BFS, which will be a growth driver in the medium to long term.
But in the near term, clients continue to conserve cash and focus on business-critical projects with immediate return on investment. Challenges such as economic slowdown, soft recession, high interest rates, geopolitical tensions continue to put pressure on the consumer business group vertical throughout financial year 2024. However, we saw some green shoots and moderate growth during the quarter, which represented the highest sequential growth in the last four quarters. We expect accelerated spend in the medium term in areas such as improving customer experience, loyalty and reach, hyper-personalization, scaling retail media network revenues, security services, cloud transformation, cloud ERP modernization, leveraging AI, generative AI, to enhance business value. I'm going to talk in detail about some of the major themes driving demand for our services.
We are witnessing a growing trend in deals enhancing customer and employee experience for enterprises and are actively pursuing such deals and taking proactive measures across industries. An American retailer of office supplies partnered with TCS to reimagine and digitally transform their loyalty program. The omni-channel platform is enabling the launch of new features like real-time reward point redemption, special savings events, and customized offers, and is key to improve customer retention and satisfaction. TCS leverages contextual knowledge to shape the cloud-based solution and deliver a highly scalable, flexible, reliable and secure solution. TCS entered into a strategic partnership with a multinational energy management company to bring grid flexibility management and energy transition for global utilities and their end customer base. TCS will integrate global energy into customers' energy management platform and together go to market for commercial, industrial, and residential end customers of global utility companies.
The joint partnership will target a potential saving of around billion-dollar energy bills for over 10 target utilities and their end industrial and commercial customers. It will generate a business value of $40 million-$60 million for the customer over the next 10 years. The global supply chain is rapidly evolving and striving to stay abreast of the ever-changing environment and advancing technological innovations. Below are a few examples of how TCS is helping businesses in modernizing processes and platforms to enhance efficiency, adaptability to market shifts, and boost their bottom line. A Norwegian postal service provider partnered with TCS to modernize its critical logistics management platform that was constraining its growth ambitions. TCS leveraged its deep contextual knowledge to implement a new digital core, a command center, improved workflows, real-time data visibility, and predictive analytics and insights.
This has helped the client reduce operating costs by 40%, enable timely interventions, improve user experience and reliability during peak periods. With an empowered workforce and faster time to market, the platform has fortified the company's position in the market. A distributor and retailer of beauty products was facing several challenges across the supply chain, and specifically, significant inefficiencies in purchase order management. TCS assessment found that over 50% of the POs contained errors and investigation was cumbersome. A control tower with an automated exception handling and shipment notification and streamlined vendor approval was implemented. This reduced manual intervention in PO processing by up to 90%, significantly mitigating the risk of human error, improving operations and vendor relations. ESG has gained traction among organizations and is becoming a crucial investment.
The need for emissions reporting and regulatory compliance towards net zero commitment is driving new business of data collection and deriving insights. Sustainable financing has emerged as a top priority and is driving the transition towards a carbon neutral economy. Our clients actively seek our expertise to develop innovative technology-driven solutions that leverage IoT, AI, and advanced analytics, aiming to reduce energy and resource consumption, monitor and measure greenhouse gas emissions throughout their supply chain, minimizing carbon footprint, reducing waste, promoting recycling, and reporting their sustainability initiatives. A Nordics major partnered with TCS to enable ESG credit risk assessment with varied degree of automation and complexity, aligned to the sustainable financing approach for corporate customers. With an efficient and harmonized approach, this program improved ECB regulatory compliance, covering four out of the six regulatory requirements.
Our solution has flexibility to accommodate future regulatory requirements and supervisory expectations, and enables a risk-based approach to ESG assessment and monitoring. Artificial intelligence is beginning to permeate our lives incrementally, through everything from the tech powering of our smart smartphones, to autonomous driving features on cars, to the cool applications retailers use to surprise and delight consumers. As a result, its progress has been almost imperceptible. Moving on to generative AI, excitement toward this technology is substantial. Generative AI is steadfastly at the forefront of the technology trend, and customers are on the lookout for POCs on the efficiencies that can be enabled by generative AI in application development, application maintenance, and deployment automation. The full realization of generative AI's benefits will take time, and enterprises and society still have considerable challenges to address.
These include managing the risks inherent in generative AI, reskilling and upskilling the workforce, and reimagining core business processes. Customers are looking at scaling out POCs and pilots by implementing necessary guardrails. TCS has been making all the relevant investments required to participate in this opportunity. Last year in August, we launched our AI.Cloud business unit, bringing together the power of cloud data and AI, including generative AI, into a dedicated group that builds on our strategic hyperscaler partnerships and deep relationships with our other major AI players. We launched AI.Cloud Academy, which provides our associates with a powerful platform to train, get certified, share knowledge, accelerate deployment, and play in our unique AI experience zone. We have one of the largest pools of employees trained on artificial intelligence and GenAI competencies.
The type and size of opportunities are evolving, with a noticeable shift towards larger, more strategic projects that encompass cloud and AI technologies. As AI use cases become augmented, it will drive underlying initiatives on cloud and data. We are gradually seeing a few generative AI use cases moving to production. Generative AI's ability to create new data and content is driving innovation across sectors. We expect wider adoption in financial year 2025, with focus on seamless integration with current workflows with a human-in-the-loop approach. TCS has partnered with a large turbine manufacturer to identify duplicate parts in the system, which are resulting in suppliers being charged different prices for the same item, causing losses to the manufacturer.
TCS has leveraged AI to extract defined attributes from the information stored in PDFs to create a data model to identify the duplicates that resulted in $15 million annually saving for the manufacturer. TCS is helping an enterprise in the material handling business to help service engineers with specific insights for equipment. The machine learning-based solution, complemented with generative AI, is directed to understand both structured and unstructured data around equipment manuals and enterprise data, and equipment manuals and enterprise data, and generate targeted instructions for service personnel to improve productivity and reduce the equipment service insights. In the past, cost and optimization benefits led to cloud adoption. Today, cloud is not merely a technology to adopt, but a strategy for business transformation and growth itself.
Cloud technologies enable us to overcome existing limitations of scale and bring partners, and bring partners, data, applications, and customers together and connected. TCS has been working closely with clients in fine-tuning their cloud strategies. The following examples demonstrate this partnership. Openreach, U.K.'s largest digital network provider and a part of the BT Group, wanted to implement a cloud-native microservices architecture. On a mission to roll out fiber connectivity across the country, Openreach realized an overall enterprise overhaul was urgently required. TCS designed a modular and scalable orchestration engine on cloud, which streamlines the entire fulfillment journey from order to billing. It provides real-time business insights while optimizing costs and reducing a total, reducing the total time to market for the customer. United Airlines engaged TCS to revolutionize pilot pay with the intention of providing real-time gross pay information with improved pay accuracy and transparency to its 15,000 pilots.
TCS was at the forefront of this collaborative approach, leading the transformation across design, architecture, and solution development. By embracing a data-driven approach with insights from United, we have truly built a future-ready, cloud-based, scalable solution that seamlessly evolves alongside United's vision. Legal & General Retirement Institutional, a leading provider in UK's pension risk transfer market, partnered with TCS to modernize its customer administration platform with the power of cloud. Leveraging the contextual knowledge of the client's application landscape, its cloud expertise and partnership with a major hyperscaler, TCS helped the client build a highly available and resilient platform. The migration to public cloud has helped the client to enhance the capacity to onboard large PRT schemes quickly and meet the demands of the growing PRT market.
The new architecture has also ensured increased availability of its customer administration platform, with the ability to recover applications within 1.5 hours. With the new platform, TCS has laid the foundation for LGRA's future growth, continued success and scale. Fueled by cloud-native capabilities and data-intensive technologies like AI, GenAI, and IoT, enterprises can harness insights and apply skills and knowledge to spur innovation to the benefit of all, whether it's involving solving complex societal and climate challenges or creating new markets and revenue streams. We are very optimistic about the longer-term opportunities from this strength. Moving on to our deal wins. TCV in Q4 was at a record high at $13.2 billion. This includes one mega deal we announced during the quarter.
The BFSI TCV was $4.1 billion, while the TCV for our consumer business group was at $1.6 billion. The TCV of deals signed in North America stood at $5.7 billion. Our FY 2024 TCV was at $42.7 billion, a record growth of 25.2 year-on-year. We can now open the lines for questions.
Thank you very much. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. We have a first question from the line of Yogesh Aggarwal from HSBC. Please go ahead.
Yeah. Hi, good evening. Just a couple of questions. On the TCV, you guys mentioned that there is only one large mega deal in the entire TCV, which is very strong, but still the near-term growth outlook is not very clear. So I was just a bit confused, if large part of the deals are smaller in TCV, shouldn't the near-term outlook improve quite a bit? That is one. And secondly, just on the India business, Krithi, in the past, companies have regretted growing India after a while, margins, cash flows, et cetera. So you think the market has matured now and it's not a risk going forward? Thanks.
Thanks, Yogesh. Yogesh, first on the large deal, what we said is one mega deal, right? In the deal pipeline. Others are all the deals of normal size we have every quarter. So it could be large deal, not a mega deal, okay? And from an overall deal term perspective, there is no change otherwise. And as we also—since you mentioned the TV interview, we said that, like, the number of deals that we've been winning in the last few quarters give us the confidence for a period of time the growth would return, right? So I don't see there is a reason for a confusion or conflict there. Coming to India, we do believe that we have to participate in the India growth story.
Many of the large enterprises, both in the public sector and private sector, are embarking on new programs to leverage the technology that's available today. We are selective. We want to ensure that we enter into the right deals, but we believe there are enough right deals in the market today.
Okay. Thank you so much, K. Krithivasan.
Thank you. We have our next question from the line of Sudhir Guntupalli from Kotak Mahindra AMC. Please go ahead.
Yeah, hi, team. Congratulations on a good set of numbers. Kriti, you reported solid dealings, and you are indicating that the demand visibility has improved over the previous three months, I think, on the press meet. On the contrary, one of our consulting heavy peers has indicated that demand situations further deteriorated over the previous three months. So is it fair to assume that the problem of incremental deterioration over the last three months is more pertinent to the discretionary strategy consulting kind of engagements and the rest of the portfolio remained largely resilient?
So definitely, in a way. So Sudhir, if you look at what we have been saying, discretionary programs with not so exciting ROI come under pressure. So if the ROI is not immediate or ROI is not meeting the threshold the customers have set for themselves, they tend to pause those programs or delay those programs. So to that extent, that could be, like, the lack of visibility on near term. But, as I said, like, since the, the TCV, the TCV has been quite high, on the medium to long term, we are more optimistic.
Sure, sir. Second question to Samir. If you adjust for BSNL deal ramp-up-led margin dilution over the previous two quarters, your EBIT margins would have already been somewhere midway of your aspirational band of 26%-28%. So my question is, have we peaked out in terms of margins or you see further scope for a margin upside?
Sure, Sudhir. So first, we'll not... We'll look at our margins as a portfolio basis, and we'll not split our customer or a geography out of it. Coming to your question on whether the margins have peaked out, in the, as you know, first quarter, we take the impact of increments, so we would have a headwind coming up. But, I think overall, during the year, we have, in spite of strong headwinds coming through, and, in a challenging macro, we have been able to deliver consistent, good margin improvement in the last three quarters, almost 100 basis points in each of the quarters. We believe some of the, levers, like, the subcontractor cost, was one of the lever which, helped significantly in FY 2024, might have bottomed out.
But, with our focus on disciplined execution, we believe still levers like pyramid pricing and utilization can help us. And if the macro risk recedes and growth reverts back higher to its normal trajectory, then that can only help us accelerate this journey.
Got it. And lastly, NGS, sir, congratulations on a glorious career. It's a privilege to listen to you, and all the best for your future endeavors.
Thank you.
Thank you. The next question is from the line of Ankur Rudra from JP Morgan. Please go ahead.
Hi, thank you. Just the first question is on, you know, the strong signing momentum you mentioned. How are you thinking about the conversion of this into revenues over the next year or so? And how does it set you up for fiscal 2025, given perhaps much easier comparables this time?
I didn't get your second question, Ankur. Can you repeat, sir?
My question was, you know, given the signing momentum has been very strong towards the end of the year-
I got that question. You have the second question.
Yeah, the second question is on, you know, how do you think about the comparables, given fiscal 2024 growth was not very high? Is it easier comparables this year? Does it help you significantly?
Yeah. TCV, definitely like, we've been also looking at, where is the revenue coming from, Ankur. Like, we are quite comfortable on the revenue conversion of the deals that we signed in the last three-four quarters. And, they've been at the similar rate that we used to convert in the past as well. So, and, like we always say, we've been saying in the last few quarters, the headwind has always been in those projects that we signed quite some time ago, and, which are of discretionary nature or where the clients can slow it down or pause for some time. Those are the ones providing the headwind. What was the second question like?
Will FY 2025, given how FY 20 24 was, will FY 2025 pan out better?
We, yeah. Ankur, like, we've been, last quarter also we mentioned this. Given the TCV of whatever we signed this quarter, we believe the FY 2025 should be better than FY 2024.
Understood. Maybe if you can comment a bit more in terms of, you know, how do you think or where do you think clients are and where do you think the environment is in terms of spending cycle? It's been almost, I think, two years now, if not slightly longer, till we've seen, you know, revenue sort of decline, decline, decline, perhaps bottom out and begin to recover. How do you feel about this spend cycle right now, especially the mix of discretionary and non-discretionary? And also, if you can touch upon financial services and TMT verticals?
I want to look at this way, Ankur. Like, clients want to do transformative work. They want to embrace new technology. We talked about cloud adoption. We talked about enterprise cloud, mega modernization. We talked about generative AI. Clients want to do all of them. Understand also clients want, they want to control costs. So these two are the drivers that work that make them choose the appropriate projects. Wherever they're trying to do on like cost and optimization, you would see programs around vendor consolidation, operating model transformation, or sometimes application rationalization. Those kind of engagements are started. And using the saving, the saving is used to fund the programs that I talked about.
So I don't think there's a if you look at purely the TCV and look at the kind of projects, you cannot say there's only one kind of project. You would see a fair mix. I would say maybe 55% in terms of cost and optimization or 60%, the remaining in terms of transformative engagement. That's how I would probably put where it, the ball at, but at a gross level.
If I can add and,
Of course.
Ankur, to what Krithi has said. Every organization wants-
I'm sorry, sir, you're not audible.
Yeah. Every organization wants to become an AI organization, so there is a huge amount of upskilling and transition that internally they are going through to train their own people on the impact that AI can have, you know, in terms of every one of their internal processes and their planning process, and what are the parameters that are important for their growth, all of it. So they are going through the AI transition themselves, right? And in addition to that, you know, given the number of new technologies that are coming in this space, the possibilities are opening up.
As I alluded to in the press conference, the first phase of the defining the architecture in which they would like to develop these programs, which LLMs will be relevant for them, which one they want to keep it in-house, which one they want to keep it, you know, in the public domain. What data that they have internally, what data they need to get it internally and measure. You know, a lot of these, you know, strategic decisions are also at play. So I think as far as the cost and optimization, efficiency, using AI for internal purposes, they're all, you know, there is no depth of opportunities. They're all happening, right? But on the strategic transformation programs, the kind of work that they want to do, they are calibrating it.
They want to solve all these internal issues, strategic issues first, assess the regulatory impacts before they want to progress further.
Thank you. Thank you for the color, NGS, and thank you so much for your, you know, guidance over the years. That was my last question. Thank you.
Thank you. The next question is from the line of Kawaljeet Saluja from Kotak. Please go ahead.
Hey. Hi. Thanks a lot. I have a couple of questions. First is on TCV and the relative lack of, what I would say, excitement about the near-term, you know, growth acceleration. You know, is there anything in the composition of TCV which is, you know, leading to this relative lack of enthusiasm? Anything, you know, which you can throw some color on, the renewal component or the ACV, you know, anything that can help us understand the dynamics of growth and TCV a little bit better?
Thanks, Kawaljeet. I won't call it a lack of excitement. We are quite happy with the TCV we signed. Our caution comes from the, also the headwinds that we face, right? Like there are, we, like, the demand or the short-term demand still remains not very clear or volatile. So that's a precautionary stand. Like, once, we go through the quarter, probably we'll get a better understanding of how the gross, let me say, overall demand, net demand. So we are quite happy with the TCV. The TCV is, we've been able to convert the TCV into revenue very well. But what we have not been able to predict is the headwinds that come out because customers want to conserve cash and then stop some of those ongoing large programs.
So that's the reason you see, so the amount of caution in terms of predicting the revenue.
Krithi, anything you know in terms of renewals versus new TCV? Because I saw a stream of announcements, but plenty of them were renewals. So, you know, how does that compare with your historical average? And if you can add any insights on the ACV number, that would be useful as well.
See, like, we don't publish ACV number, Kawaljeet, but from a renewal to a new revenue, actually, there is no change. Actually, if at all, I would say that it's our new revenue has been stronger.
Okay. That's, you know, heartening to hear. Now, the second question is for Samir. Samir, you know, any other levers through which you can juice up the margins? I understand there is some near-term headwind from, comp revision, but, just to understand, the perspective of, profitability and how it can improve. Any levers that can highlight? Because at least from the face of it, to us, it looks like, the engine is, running nice and, you know, in a very optimized way today.
Yeah, Kawaljeet. So, the ones I called out, pricing and utilization have proved paramount. Productivity and utilization definitely have further scope. We also believe that incremental margins will have to be contributed by pricing improvements.
Right. The final question that I have is on the BSNL deal, right? So there's $1 billion of revenues that come in, let's say, a period of 12-18 months. You know, is there subsequent work packets that will flow in? Or, you know, does this create, let's say, a revenue vacuum as you move into FY 2025 and 2026?
Hi, this is NGS here. I think, see, we are currently, we are focusing on installing the network across 100,000 towers. We have achieved about 10,000 towers as of date, and there are further opportunities. For example, beyond rolling out these 100,000 towers, we also have to upgrade a good number of them to 5G. That's another revenue stream that will come. And then, subsequently, you know, the maintenance, support and aspects is for the next year, foreseeable future. That's another thing that is expected. In addition, there are also opportunities to increase the number of towers that BSNL will deploy, because clearly they are focused on what they call saturation sites. Which essentially means rolling out new towers in rural areas where hitherto even a mobile network doesn't exist.
So there are really some more opportunities that will come from the BSNL. But clearly, you know, this is a mission-critical project, very complex, highly integrated and indigenously developed. The opportunities to take it to market for, with other operators and other things, is an opportunity that we are calibrating.
Got it. Fantastic. Thanks. Thanks a lot.
Thank you. We have our next question from the line of Surendra Goyal from Citigroup. Please go ahead.
Good evening, everyone. Quickly, I'm just trying to understand your commentary better. You have sequential growth in Q4. You are saying that visibility has gotten better. Do you see TCV trends are good and mostly regular sized deals? And June and September are seasonally strong as well, based on what we have seen over the years. So why are you not willing to call out growth in the coming quarters? Is there a leakage in the existing big business a concern enough to hold you back despite so many positives? Any clarity would really be helpful.
Yeah. Surendra, two things: One, we have never given guidance. Two, as I told, whatever answer I gave to Kawaljeet, like, there is a certain amount of unpredictability in terms of our customers' willingness to or readiness to cut the discretionary work that we are doing, or based on the return on investment they are seeing. And it is also a factor of how they see the economy panning out or how what they should be ready for. So if there is a greater confidence on their overall business growth, you would see them now at least embarking upon more discretionary projects or not passing the projects. So it's a question of the overall economic sentiments our customers are in. That's the reason that we are not sounding very optimistic.
Are there particular-
We are being cautious here because of these reasons, Surendra. Go ahead. Sorry.
No, and are there particular verticals where you see the reprioritization happening more commonly compared to, say, rest of the business?
No, it comes from, like, their individual perception on where... See, there are some programs where we have seen a number of incremental enhancements are supposed to be done. But when they see the new enhancements not going to yield greater value, they don't do those enhancements, they stop at wherever, whatever, after the initial set of modernization. So, or there are—we have seen programs where they signed up to initially a very high SLA, but they realized that, given the current environment, that kind of SLA is not required. So then you have a lesser number of associates handling the same program with a reduced SLA. So you see a mix of.
There was one instance where the customer sold off their business to somebody else or they got out of that business, so they ramped down the people in that program. And some of these decisions happen at a very short notice. So this is broadly the spectrum we are seeing.
Just a housekeeping question. Are any business which get canceled, either because of customers selling off a business or any other reason, what you report, is that a net number or just a gross number?
No, like, what is a net number or what?
No, what I'm saying. See, if you had signed a deal six months back and then the deal got canceled, would this quarter be net of that cancellation, or the cancellations are not accounted for?
Our TCV is only what we sign new in a given quarter.
Understood. Thanks. NGS, thank you for all your insights over the years, and all the best.
Thank you so much.
Thank you. We have our next question from the line of Gaurav Rateria from Morgan Stanley. Please go ahead.
Hi, thanks for taking my question. Just wanted to get a little bit better trends on BFSI. You did talk about insurance vertical, growing during the quarter across geographies. If you could lay out in terms of outlook within BFSI of subsectors, what's gonna grow and where the visibility is higher, where visibility is still not there, that will be very helpful.
Hi, Gaurav, this is NGS here. I think, overall, our engagement with our customers in the BFSI segment has been, terrific and, very good partnership that led to about $4.5 billion worth of TCV during the quarter. Insurance is doing well. Capital markets is, just, now, almost every stock market is doing well. So there are, there are increasing, opportunities that are coming, but largely in, putting controls, risk, and safety measures, as opposed to trading systems or, trading settlement systems, because they're all working, they're all scaling, and, they don't want to touch it, and they have invested a lot, and algo trading everything. On the retail banking side, clearly, payments and wealth management are two significant areas where we have customers wanting to try out new technologies.
Especially portfolio management, portfolio optimization, and using GenAI to rebalance and then reducing in a way that increasing their own productivity and giving that agility to their customers is something that we are seeing, and identifying arbitrage opportunities on the fly. These are all cases that people are trying it out, and there are opportunities in payments specifically and wealth management on the retail segment. Market infrastructure side, yeah, there are a good number of programs are in the pipeline. As you know, we signed up the deal with ASX, Australian Securities Exchange, and we implemented one of the most complex commodity systems for MCX. And we continue to engage with you know, customers of ours, like London Clearing House and other firms.
Large market infrastructure programs in payments, payments modernizations, and almost every market, they are considering to implement something like a UPI, faster payments, instant payments. These are all discussions that are going on, but these are all long-term projects, so deal cycles are expected to be longer. I hope that gives you a perspective.
Thank you for the very comprehensive answer. Just a follow-up on this, where are you seeing the unexpected ramp downs or, you know, behavior of client decision-making within these segments? And any likelihood of that kind of, you know, continuing... I mean, are you expecting this to continue in the current quarter as well?
I think, you know, I can't really, you know, pinpoint something except that, look, you know, if you take our BFSI segment, for example, most of our customers, they're all long-term strategic customers for us. We have enjoyed a phenomenal relationship and partnership with all of them. So we sign deals and they commit deals to work with us. But then at the same time, they come back and then say that, "Look, yes, I signed this deal, and then I want to defer this for about a quarter." Even though contractually they may not have that option, we remain flexible with them, and then we have to accommodate them in the interest of our long-term relationship. And culturally, we are like that, right?
So from that perspective, you know, we see some volatility in decisions, because, for example, if they face a headwind, they come back and then talk to us and then say that, "Look, can you execute this program in terms of, in terms of 12 months, can you do it over 18 months or 24 months?" And such things happen, then, you know, it's an unplanned, you know, let's say, distribution of work that we need to manage, and customers love us for that, right? So I think we will continue to operate in that fashion. And it is that volatility which we are not able to predict. And at the same time, today, there are so many startups coming in AI. Some of them they say that, "Look, maybe I want to invest in that startup rather than building it myself.
Why I wanted to build it, but today I want to see whether conceptually what they are coming up with is interesting. Maybe I will invest in them and then accelerate their journey and adopt that technology." So these are all the volatility that we see in the marketplace, for which, you know, we will like to be respectful of their thoughts and decisions and accordingly align ourselves to this. And that's the volatility which I'm not able to predict, and I'm not able to communicate it. We only echo what we see and what we hear from our customers to all of you.
Thank you very much. Last question for Samir. On the comfort band of 26%-28%, you did talk about pricing to be one of the levers that will be required to sustain the margin in that. In the current environment, do you expect this to play out in the coming quarters based on the kind of deals that you have signed? Or is it more of a factor that could be, you know, at play only when the discretionary spend were to return back? Thank you.
No, so we believe that incremental margins will have to be contributed by pricing improvements. That need not be through an immediate pricing increase, but will need to work out structurally. Towards that, it would be a combination of various factors. Overall, portfolio-based pricing increasing, renewals getting priced in at a higher price, or when the renewals happen, asking for a price increase, or the overall new deals which come in. get factored at a higher price. So it, I wouldn't expect it in one quarter or, we go and ask for a price increase to a customer, and we would get it.
Thank you.
Thank you. We have our next question from the line of Kumar Rakesh from BNP Paribas. Please go ahead.
Hi, good evening. Thank you for taking my question. My first question was for Samir. So we are exiting this year closer to 26% on the margin side. So through the next year, FY 2025, through the quarters, should we expect quarterly movement of margins similar to what we saw this year? Or there were some difference in the trajectory which we saw and we should, we should build accordingly?
I think, one thing for sure is, like it happens in every year, we'll take the impact of increments, the headwinds, largest headwinds coming in in Q1, and then we claw back on the margins as we go through the year, and we would expect a similar trajectory to happen.
Got it. And there has already been a lot of question around the deal TCV, ACV, and the revenue conversion. Additionally, K. Krithivasan, you also spoke about in the last quarter about the pent-up demand in the retail segment. This quarter, you have spoken about pent-up demand to be there in BFS. So how do you see that panning out in the context where you have caution in the near term, while you are also talking about there is a pent-up demand? What do you think that would be the catalyst that you would be looking at, where this pent-up demand eventually starts translating into revenue and gives you more better visibility on demand and comfort as well?
Kumar, like, to me, like, once the customers are comfortable about their demand environment, about their market, or for instance, like, see, insurance today, they look at their long-term growth to be, say, for manufacturing, we find there is a lot of activity. So those sectors we find there is a investment happening. So it is a factor of those individual businesses, like, capital markets has done reasonably well this quarter. Like, we found that trend happening in the regulatory sector, the risk and compliance. So it depends on the individual customer, and wherever they see that there is a greater confidence of their business, you would see the pent-up demand also being satisfied. And, as long.
Again, it's also a factor of what is the return on investment that particular investment will give them. So it's more a factor of the individual business and the client's outlook, Kumar.
Got it. So in any of the verticals or pockets, have you already started seeing this pent-up demand starting to translate?
I won't call it pent-up demand, but as I spoke in my original commentary for consumer business, for now, we have started seeing green shoots in pockets. Like, even this quarter, we found airlines, transportation doing very well. So you would see pockets in each of these verticals. I won't say in any given vertical, you may not have all sub- verticals return to growth path, but there will be some sub- verticals that would return to growth path. As I said, this quarter, insurance grew well, airlines and transportation grew well. Manufacturing, by and large, most of the segments in manufacturing grew well. So this is what we are seeing.
Perfect. That's very helpful. Thanks a lot.
Thank you. Ladies and gentlemen, that was the last question for today. I now hand the conference over to the management for closing comments. Over to you, sir.
Okay. Thank you, operator.
Sir, you're not audible.
Thank you, operator. We are very pleased with our financial year 2024 performance, growing at 3.4% in constant currency amidst the macro uncertainty prevailing in the major markets. Our Q4 revenue grew 3.5% in rupee terms and 2.2% in constant currency terms. Deal momentum continued to be very strong in Q4, with our order book at $13.2 billion for the quarter and $42.7 billion for the full year. Our Q4 operating margins improved to 26%, an expansion of 100 basis points sequentially. Our net margin in Q4 stood at 20.3%. Our LTM attrition in IT services fell further to 12.5%. We continue to deliver resilient results, winning market share and balancing growth with profitability. We have an exceptional leadership team and an extremely dedicated workforce.
It has been every TCSer's hard work during the year which fueled our collective achievements, and I would like to thank each one of them for their contribution to the company's success. With that, we wrap up our call for today. Thank you all for joining.
Thank you, members of the management. On behalf of TCS, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines.