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TCS says no recession in the near term, but deal size is shrinking

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  • TCS did not land a billion-dollar deal in the June quarter, with new deals falling to $8.2 billion, compared to $11.3 billion in the previous quarter.
  • Instead, the size of the deal was significantly smaller this time around, with only two $400 million wins.
  • The rest, TCS says, consisted of small and medium-sized deals, suggesting companies are straining their wallets amid recession concerns.

The stock markets have priced it, the bears have ridden it and now even the commodities are reacting to it – a possible recession in the US and Europe.

But India’s largest tech company, which could be most affected by it, doesn’t appear to be seeing an effect — at least not in the short term. Rajesh Gopinathan, the CEO of TCS, said they are closely following the ‘R’ talk with the information mainly coming from the newspapers.

“We are having serious discussions about it (recession). But we don’t see an immediate footprint of it any time soon,” he told reporters at the company’s press conference.

However, long before the recession, recession fears arose along with those of various macroeconomic models such as stagflation, slowflation, the classic slowdown and more.

It seems that some, at least some of these fears are having an effect on the size, if not the number of deals this IT major lands. First, it didn’t win multi-billion dollar deals in the June quarter. The biggest it has won are two $400 million deal wins.

But to be fair, it won a whopping $8.2 billion in deals in the quarter. But this too is much lower than the $11.3 billion order book it racked up in the last quarter before. The big companies may be squeezing their fists or spending on IT, but spend less.

The company clarified at its press conference that its $11 billion figure from the previous quarter was marked by two big wins. Expecting that going forward is “difficult” — whether hard to replicate or such deals becoming rare in the market — remains unknown.

“I think it’s safe to assume that we’re going to get between $7 and 9 billion. This quarter, two $400 million deals were the biggest we had. Otherwise, it’s a mix of small and medium deals. trend is likely to continue,” said NG Subramaniam, Chief Operating Officer and Executive Director, TCS.

TCS revealed that its retail segment was growing the fastest and that healthcare is now back on the back burner and coming in at the end. BFSI has segmented its top spot as it has always been.

Segment Grow Result
BFSIA 13.9% ₹5,170 crore
communication 19.6% ₹2,370 crore
Retail 25.1% ₹2,220 crore
healthcare 11.9% ₹1,602 crore
production 16.4% ₹1,404 crore
others AFTER ₹650 crore

Source: Company Reports

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