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Tata Consultancy Services (TCS), India's biggest IT services provider, today reported exceptional item of Rs 2,128 crore due to the statutory impact of new labour codes, dragging its consolidated net profit 14% year-on-year to Rs 10,657 crore for the October-December quarter. Revenue for the quarter rose 5% year-on-year to Rs 67,087 crore, compared to Rs 63,973 crore year ago.
The exceptional item relating to the statutory impact of new labour codes consists of gratuity of Rs 1,816 crore and long-term compensated absences of Rs 312 crore, arising due to a change in wage definition.
The IT services major stated that it assessed and disclosed the incremental impact of these labour law changes based on the legal opinion obtained and the best available information, consistent with the guidance provided by the Institute of Chartered Accountants of India.
"Considering the materiality and regulatory-driven, non-recurring nature of this impact, the Group has presented such incremental impact as statutory impact of new labour codes under exceptional items in the consolidated interim statement of profit and loss for the period ended December 31, 2025," TCS said in its audited standalone and consolidated financial results for the quarter and nine-month period ended December 31, 2025 with the national Stock Exchange.
In November last year, the Centre notified the four labour codes - the Code on Wages, 2019, the Industrial Relations Code, 2020, the Code on Social Security, 2020, and the Occupational Safety, Health and Working Conditions Code, 2020 - consolidating 29 existing labour laws.
Provision towards legal claim
The company's profit was also weighed down by another exceptional item of Rs 1,010 crore relating to a provision towards a legal claim filed by Computer Sciences Corporation (CSC).
In April 2019, CSC filed a case in the Court of the Northern District of Texas and Dallas Division alleging misappropriation of trade secrets and other confidential information. It had sought preliminary and permanent injunctive relief, and unspecified monetary damages and disgorgement of profits.
The trial court, in its order of June 13, 2024, ordered that TCS is liable to pay CSC $56 million (Rs 505 crore) in compensatory damages and $112 million (Rs 1,010 crore) in exemplary damages.
"Considering all the facts and various legal precedence, on a conservative and prudent basis, the Company provided $112 million (1,010 crore) towards this legal claim in the consolidated interim statement of profit and loss for period ended December 31, 2025 as provision towards legal claim under exceptional items," the company said in select explanatory notes to the statement of audited consolidated interim financial results.
TCS also said it has a strong case and would defend its position vigorously and pursue legal remedies to overturn the decision of the Fifth Circuit that had affirmed the trial court's ruling on liability of $56 million in compensatory damages and $112 million in exemplary damages. The Fifth Circuit Court of Appeals is a key federal appellate court in US with jurisdiction over several states.
Restructuring expenses
TCS reported restructuring costs of Rs 253 crore as another exceptional item in the quarter ended December 31.
The costs relate to a massive restructuring initiative TCS undertook in July last year, resulting in the laying off of about 2% of its workforce and impacting over 12,000 employees during 2025.
"Termination benefits have been provided as per the policy devised for this purpose. Such termination benefits, due to their size, nature, or occurrence, are disclosed as restructuring expenses under exceptional items in the consolidated interim financial statements," TCS said.