India’s largest software exporter TCS has posted a strong quarterly result. The company plans to continue focusing on its digital business, which now contributes to about 15.5 per cent of the revenue. While talking to the media on Monday, CEO and MD N Chandrasekaran charted out the company’s strategy for the next year. Excerpts:
Your BFSI business seems to have improved significantly. Do you believe the headwinds from insurance business and Latin America have been taken care of?
The BFSI segment had a very strong quarter at 3.2 per cent. We are getting growth in insurance and core BFSI is doing well, which delivered 14.8 per cent. On our analyst day, we had said BFSI will do well.
There are three important themes — digital theme, simplification and efficiency theme, and regulatory theme. While all three continue, they are related in one form or another.
But, digital theme is picking up momentum across sectors. Whether it is cloud or analytics, we think the growth is good.
In terms of headwinds, insurance has turned a corner. Speaking of Diligenta, we are more or less at the bottom. From here, we don’t expect to go down.
In terms of Latin America, the region did well last quarter and even this quarter.
Our energy and utilities division has also performed and as we go into the future, we expect that energies and utilities business will continue to perform.
We don’t expect a huge decline in revenue from Japan but I won’t say the momentum is predictable to say it will be a significant positive number.
Overall, we are exiting more than a percentage lower this year than last year, but the headwinds we had last year have been taken care of. So, we don’t have any specific headwinds that could create problems.
Your margin declined by 54 basis points in this quarter. Do you see some pressure on this front?
Our stated goal is to be in the 26-28 per cent margin band on an annual basis.
We’ll make some calls in terms of what kind of investments we do in a particular quarter, especially when we build our new capabilities, as one sometimes has to make additional investments. These are the type of decisions we have to take. But we are confident that we’ll remain in the band.
You added over 90,000 employees this year. Do you expect a similar number for the next year?
We have given offers to about 45,000 trainees. Typically, we get about 30,000-32,000 trainees joining.
But our lateral recruitment overall gross addition this year will be much lower than the last, for three reasons. First, we think our attrition is trending down as the steps we have taken are yielding results, having come down to 14.5 per cent, the lowest in the last four quarters.
Second, we see significant opportunity for productivity.
Third, we believe that the technologies that we have in terms of machine learning and automation are helping us transform, and all of these things put together, we will have much lower gross addition this year.
Has the TCS-Epic case led to concerns among clients?
We will deal with the situation. Currently we are in touch with the people we are in need to be in touch with, and don’t see any major issue.
Are you happy with the growth in digital business, and do you see momentum being maintained in coming quarters?
We have seen digital becoming mainstream. We have been saying this for some time now that digital is going to be the way the future is going to be, whether you talk about financial services or retail.
We were used to seeing growth in analytics, mobility, and so on. But when the momentum starts to pick up, all of these things will come together so that you are able to talk about the digital transformation journey of a client, and that is beginning to happen.
So, we are very happy with our digital growth. It was 52.2 per cent growth on a year-on-year basis. I expect this momentum to continue. Also, the deal wins we are seeing tells us that this momentum will continue.
Although your India business crossed $1 billion, does that continue to be cyclical?
We have a combination of our corporate and our government business and our platform business – all three businesses are growing in size and scale now, and we have also fully integrated CMC. All this should help us deliver a decent year, though I won’t rule out little volatility between quarters.