Tata Consultancy Services said on Wednesday fourth-quarter results were weaker than it had expected as some of the IT company’s clients in the North American banking space deferred project spending amid the US financial crisis.

India’s top IT exporter flagged “a lot of uncertainty” in its banking, financial services and insurance segment over the near-term in the North American market as clients rushed to conserve cash.

“The quarter has come out weaker than what we originally anticipated and primarily coming out of North America,” TCS CEO Rajesh Gopinathan said in a media conference.

A meaningful recovery in North America has not materialised as expected and has worsened instead, he said.

The results also come as the company goes through a CEO transition, with K. Krithivasan taking over as the top role on June 1 in place of Gopinathan, who resigned in March.

The country’s largest IT services firm reported a 14.76 per cent rise in net profits at Rs 11,392 crore for the quarter ended March 31, 2023 against Rs 9,926 crore a year ago. The January-March is a seasonally weak period for the industry.

Brokerages such as IDBI Capital had expected the Tata group firm to report a net profit of around Rs 11,400 crore. However, some analysts had forecast a 16 per cent rise in its net profit.

Revenues of TCS also broadly met expectations rising nearly 17 per cent to Rs 59,162 crore from Rs 50,591 crore a year ago.

Speaking to the press for the last time in his capacity as the CEO of TCS, Gopinathan said the demand scenario is varying by market, with customers deferring discretionary spending to conserve cash. Gopinathan is of the view that the current trend is ``more sentiment at play than anything structural’’.

During the quarter, while North America showed a 9.6 per cent constant currency growth, the business in the UK reported a 17 per cent growth and Europe, 8.4 per cent.

In constant currency terms, the BFSI (banking, financial services, insurance) segment grew 9.1 per cent, retail 13 per cent and the life sciences segment, 12.3 per cent.

TCS said its free cash flow stood at Rs 41,440 crore for the year, which is 104.1 per cent of the net income, and declared a final dividend of Rs 24 per share. This will take the annual payout to Rs 45,602 crore.

New CEO from June

K. Krithivasan will take over as the CEO of TCS from June, with outgoing CEO Gopinathan staying on till September 15 to help with the transition.

“We wish to inform that the Board of Directors of the company have, at its meeting held today (Wednesday), appointed K. Krithivasan as the Chief Executive Officer and Managing Director of the company to take over from Rajesh Gopinathan with effect from June 1, 2023, subject to approval of the shareholders. The term of his appointment is for a period of five years’’, TCS said in a regulatory filing.

Last month, TCS had announced the resignation of Gopinathan and named Krithivasan as CEO-designate.

Krithivasan, who joined the company in 1989, held various leadership roles in TCS and was heading the BFSI vertical before taking over as the CEO-designate. TCS had then disclosed that Gopinathan will continue till September 2023.

“Krithi and I are working closely to ensure that the leadership transition over the next few months is smooth and seamless to all our stakeholders, and that TCS is well positioned to capture the opportunities ahead’’, Gopinathan said today.

While the reasons for his sudden exit are not known, some reports at the time of his resignation attributed it to slowing growth and discontent over a major strategy shift that was launched in April 2022.