Tata Consultancy Services (TCS) has announced its third quarter results. The company posted a net profit of Rs 1104.7 crore (Rs 11.04 billion) versus Rs 991.5 crore (Rs 9.91 billion) in the previous quarter, increased by 11.41%.

The CEO and MD of TCS, S Ramadorai feels that in this quarter they have performed exceptionally well in terms of  profitability, EBITDA margins and an improvement in the basis points.He states that they are focusing on pipeline and developing a global network delivery model.

Excerpts from CNBC-TV18's exclusive interview with S Ramadorai:

Q: It looks like another strong quarter for you from the revenue perspective?

A: Overall it has been an exceptional performance. We are very pleased and the entire team is extremely happy. Revenue, profitability, EBITDA margins, improvement in the basis points, environment where business momentum is very much there and number of wings across the various business lines we operate in.

Q: Do you think you have got into a sustainable double-digit kind of volume revenue growth patch caught sequentially because that’s what you have been exhibiting for the last few quarters?

A: Pipeline and the generation of the momentum in a focused manner and bringing out the integrated full services play including a global network delivery model are something which we are focusing on and I am sure is going to bear fruit in the future.

Q: Generally are you feeling more optimistic about the whole pricing environment or is it still on the margin with new clients because 4.9% is higher than what most of the other large companies are exhibiting?

A: In our existing contracts, 3-5% there is certainly an improvement in rates. The longer contracts, the large deals, always come up for renewal after a couple of years. I think when you are showing the value proposition over three years or so, price increases will certainly be possible. But the commitment we need to provide is what kind of a value creation and what kind of service level we are committing to.

Q: What’s your sense of the landscape that you are seeing there because the year has begun - have you got some initial feedback on the kind of IT spending you are expected to see in calendar 2007?

A: Its too early to say because most of the companies just before Christmas were going through the budgeting session. But I think the discretionary spend with regard to impact of technology on business growth is very much on the agenda of most of the CIOs, CFOs and CEOs. We believe some of the offerings which we have, full services play as we articulated - whether its IT services, infrastructure services or BPO and a global network delivery model is going to be very fundamental and that’s what the global customers are looking for.

Global operations with expansion in other geographies need IT systems to support effectively. I think any company which has a global footprint, a presence and a delivery capability at a maturity which is very similar to what we do out of India and distributing across these is going to be very much in demand. So I think what we articulated two years ago, three years ago and we have been sustaining through a scale of model, that’s going to be very important for the future and I am sure future for this country as well.

Q: Is it going to be a little bit more of a challenge this year, now that some of the global corporations are getting more infringed through their inorganic moves in India - EDS taking a platform in MphasiS BFL etc? Do you think from a HR perspective and also from a delivery perspective it might be more of a challenge now?

A: Yes, not only with IT companies or the multinationals coming here and setting up operations, the whole talent generation and talent absorption is planning across sectors - take retail, telecom, manufacturing, biotech, life sciences or private equity investment banking. So the talent requirement is only getting more and more. So in an environment where people can shift across multiple disciplines and bring in the management capabilities, they is going to be in tremendous demand.

So the challenge for all of us is, can you retain people who have made this organization? How do you work on the people's aspirations to make sure that they get the responsibilities and opportunities for growth? Second, how do you attract the best people and you need to go to more colleges. We have gone in 295 colleges this year as an example. We have also started a programme called Ignite, where B.Sc. graduates are going to be trained over a period of seven months. I think we have to bring in innovation in the talent pool generation, talent competency building and ultimately retention as a strategy is very core; otherwise people are going to see opportunities and they will certainly exercise those opportunities.

Q: What about CMC because we have had a really strong quarter this time? Do you think it has finally turned the corner, we can see some solid growth coming in from CMC now?

A: One is, the cleaning up of CMC in terms of some of the competency, some of the earlier contracts, purely government related contracts has taken us a while. That phase of cleaning up is definitely behind us, now we are looking at a very focused area of growth in embedded systems and transportations like ports and some of the other assets which they have which will leverage extensively.

A combination of government, non-government, India, overseas and joint strategies is beginning to work well. We have turned the company fairly good in terms of profitability but we would like it to push to TCS levels for sure. I think the management and the opportunities for CMC in the areas we have chosen is definitely good; there is plenty of scope. I think we hope to see continuing good results.

 Q: There has been lots of talk about whether Tata Group is looking to sell some stake to raise money for their Corus bid? Is there any truth to that at all?

A: Absolutely no truth to it. TCS has its own independent board of directors, TCS chases its own destiny and there is no truth to this statement.

Q: As a promoter Tata Group could be entitled to selling some part of its stake without violating any of the interest with TCS management or the board as such?

A: They have no such intentions.

Q: Independently have you thought or considered an ADR as it’s been reported in the press in the last one month?

A: No, we have not independently deliberated or considered but like any management, any company we will look at all the options but there is nothing on the cards right now.

Q: Is that something that comes up in the board meetings? Your plans or any kind of aspirations of having a global listing - has it come up in this board meeting at all, independent or what is happening with Corus or Tata Steel or anything?

A: No, we never discuss these things in our board meeting, at least in the last few board meetings.

Q: Somebody told me that starting next year, now that you have had one full year of talking to the market and talking to investor fraternity, maybe when you speak in April you will probably consider giving a full year guidance - is that true?

A: As a company, as a group we have shied away from guidance. We very clearly said long-term value creation for our shareholders is very fundamental. We should not be constrained in our investments with the future. Taking all of these into account there are no changes, not to give guidance will continue.

Q: One month to go for the Budget. The Finance Minster has made some statements about removing tax concessions - do you think he might be hinting at what could happen for IT or you have no apprehensions or thoughts on that score?

A: What we have been saying is, the STPI (Software Technology Parks of India) we must extend beyond 2009 as an industry, as Nasscom, as individual companies because otherwise it creates an anomaly where SEZs are there, STPI, smaller companies, medium companies, our own operations. A clarity with regard to SEZ also - what it means, how do you shift counter, how do you shift people, what it means operationally is still pretty confusing. We have brought up all these issues, I hope its get clarified in the Budget and as an industry I would like to it extended beyond 2009.