IT behemoth Tata Consultancy Services (TCS) will be making a balance provision of $125 million in the December quarter of FY24, after the US Supreme Court rejected the company's plea in a matter pertaining to EPIC Systems Corporation, according to the regulatory filing by the company.
The development comes almost a year after the US court ordered the IT behemoth to pay a fine of $140 million in the Epic systems case.
"Pursuant to Regulation 30 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, and in continuation of our prior filings since April 2016, we hereby inform you that in the EPIC Systems Corporation matter, the United States Supreme Court on November 20, 2023 rejected the Company’s petition to file an appeal against the orders passed by the US Court of Appeals, 7th Circuit, which confirmed the punitive damages award of USD 140 million passed by the District Court of Wisconsin," the company says in a statement.
"The Company intends to make the balance provision of approximately USD 125 million in its financial statements as an exceptional item, for the third quarter and nine months ending December 31, 2023," it adds.
The case pertains to a lawsuit filed by the US-based Epic Systems against two Tata Group companies—Tata Consultancy Services and Tata America International Corp—for "brazenly stealing secrets, confidential information, documents and data" belonging to Epic while consulting for its customers.
In the lawsuit, the US firm also alleged TCS employees of fraudulently accessing Epics software beyond the purview of the consulting contract in order to improve their competing product. Following this, in 2017, a US court fined the IT behemoth worth $940 million in compulsory and punitive damages. The fine amount was later reduced to $420 million and $280 million, respectively.
The development comes days after the IT behemoth witnessed a decline in its US dollar revenue for the first time in 13 quarters. While the quarter reported a surge in net profit and revenue by 8.7% and 10%, respectively, the IT major revealed that it has been witnessing a lot of requests for cost optimization amidst macroeconomic uncertainty in its key markets including North America.
"In any given quarter, there will always be some amount of de-growth. What's happening now is that de-growth is not being compensated fully because clients are optimising and there is some deferral happening," said K Krithivasan, MD & CEO, TCS.
"If the existing projects get paused or optimised more than the incoming revenue, it results in muted or moderated revenue growth," Krithivasan added.
According to Krithivasan, once things settle down, this optimisation will be compensated by new projects.
Shares of TCS ended 0.26% lower at ₹3,510.30 on Tuesday.
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