Tata Consultancy Services (TCS), India’s largest IT services company, has been facing a delay in receiving payments from its clients. According to a report by CNBC TV18, TCS hasn’t waited this long for payments in the last 8 years. The company’s management has attributed this delay to the current economic uncertainty and the resulting caution exercised by clients in releasing payments.
The delay in payments has resulted in an increase in TCS’s working capital days, which is a measure of the time taken by a company to collect its receivables. As per the report, TCS’s working capital days have increased to 72 days in the June quarter, which is the highest in the last 8 years. This is a significant increase from the 56 days reported in the same quarter last year.
The delay in payments is not unique to TCS and is being faced by the entire IT industry. The current economic uncertainty has led to a slowdown in discretionary spending by clients, resulting in delayed payments. Additionally, the COVID-19 pandemic has also disrupted the payment cycles of many companies.
TCS’s management has stated that the company is working closely with its clients to expedite the payment process. The company has also taken steps to manage its working capital more efficiently, including optimizing its invoicing and billing processes. However, the delay in payments is expected to have a short-term impact on TCS’s cash flows and profitability.
Despite the challenges, TCS has reported a strong set of quarterly numbers, with revenue growing by 3.7% sequentially. The company’s net profit also increased by 1.4% sequentially. However, the delay in payments is a concern for the company and the IT industry as a whole. TCS’s management will be closely watched to see how they navigate this challenge and manage the company’s working capital in the coming quarters.
In conclusion, TCS is facing a delay in receiving payments from its clients, which is the longest wait in the last 8 years. The delay is attributed to the current economic uncertainty and the resulting caution exercised by clients in releasing payments. While the company has reported strong quarterly numbers, the delay in payments is expected to have a short-term impact on its cash flows and profitability. TCS’s management will need to work closely with its clients and take steps to manage its working capital more efficiently to mitigate the impact of this delay.