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Apr 18, 2013, 11.09 AM IST | Source: CNBC-TV18

Deal pipeline strong; to hire 45000 employees in FY14: TCS

IT major TCS managed to beat street estimates and declared good set of fourth quarter earnings on Wednesday. The company remains confident to clock better growth in FY14 than FY13 and aims to exceed upper end of industry body Nasscom’s guidance in FY14.

IT major TCS managed to beat street estimates and declared good set of fourth quarter earnings on Wednesday . The company remains confident to clock better growth in FY14 than FY13 and aims to exceed upper end of industry body Nasscom’s guidance in FY14.

Speaking to CNBC-TV18 MD & CEO N Chandrasekaran said, TCS continued to see strong momentum, deal closures were happening and it is positive on all sectors including financial services.

“Our deal wins have been broadbased, across BFSI, pharma, and retail. Also, our deal pipeline in US and Europe remains healthy."

The company is expecting attrition rate to rise, but it is taking all efforts to retain the talented pool. TCS will hire around 45,000 employees in FY14 and says wage hike in FY14 is likely to be similar to FY13," he added.

TCS reported sector leading revenue growth. Its dollar revenues came in 3% higher at USD 3040 million and profits were boosted by higher other income. However, a decline in EBIT margins by 73 bps was on expected lines.

Rajesh Gopinathan, chief financial officer; Ajoy Mukherjee, EVP & global head- HR and Phiroz Vandrewala, director also shared their views on the future outlook of the company.

Below is the edited transcript of the interview.

Q: It was good to hear you say that you are top National Association of Software and Services Companies (NASSCOM) estimates for the year because the market was a little confused after hearing one of your peers earlier which put out very tepid guidance. Take us through first, what leads to this optimism about FY14? Why are you confident of doing better than what NASSCOM is putting out?

Chandrasekaran: There are couple of ways I look at it. From a customer perspective, I think there is lot more clarity in where they want to spend and they are going about it in a systematic fashion. There’s a lot more clarity in terms of simplification initiative, investments in digital. This is irrespective of whether it’s a customer who is increasing the IT spend or a customer who is not so much not increasing but trying to get more value of the money they spend. As compared to last year, there’s a far more clarity
 
From our internal perspective, we believe that the pipeline is strong. The number of deals that we are closing in a new area like digital, are continuously increasing.  For example, this quarter alone, we closed more than 100 deals. They are small deals but still large in number. So, both these things give me confidence that we are going to come out well this year.

Q: Let’s talk a little bit about macro headwinds that the global economy has been seeing. We have seen some downgrades in terms of growth expectations. We are now finally seeing weaker data come in from the US because of all the Budget cuts that was factored in February and March. Are you building in a downside to your otherwise confident expectations?

Chandrasekaran: My perspective is based on what I hear from clients. The last two to three years have taught me that there is really not a definitive correlation between the macro data and the technology spend primarily because tech is being used to do a lot of recovery as well. Companies are going on simplification drives.

That again involves technology and companies who want to seek growth whether in their current businesses, new markets or in new products and services are adopting technology. So, we believe that there is a significant opportunity as long as we can partner with clients in whatever they want to accomplish. So, the data points indicate that while we are very watchful about the macro, we have got to be more focused on what happens on the ground.

Q: I know you don’t give guidance, I know you said you will exceed the industry targets set out by NASSCOM. Some brokerages are expecting FY14, 16 percent dollar revenue growth, when you look at earnings, 20 percent earning, CAGR between FY13 and FY15. Are these numbers doable?

Chandrasekaran: We don’t give guidance but in general, we are confident that we will do well in FY14 compared to FY13. FY13 has been a good year. We certainly will come at the higher end of NASSCOM and exceed the NASSCOM estimates which were at 10-14 percent. Our constant currency growth was 16.2 percent, volume was 16.8 percent. I cannot specifically comment on numbers but I am quite positive that it is going to be a better year.

Q: In the quarter gone by, which is the fourth quarter, there were some one-off disproportionate contributors to your growth performance. For instance, some analysts pointed to a jump in sales of equipment and licenses. If I was to look at it from a geography point of view, India did very well; about 19 percent growth. Can you talk about the sustainability of these specific one-off contributors and therefore what impact the next quarter will see?

Chandrasekaran: India has always been a volatile market. So, there will be a quarter in which it will give me a little bit extra incremental revenue while another quarter will pull us down. That is the nature of the mix that we have in India and most of the engagements we do in India, especially in the government sector are all system integration engagements. So, that does not bother me at all. I think it is sustainable. It should be a well-rounded performance for us if you look at it across markets.

Q: Both India and Latin America have contributed far better than some of the other markets in terms of just the growth percentage numbers. Do you expect that if these two markets are volatile and lumpy in the numbers, then we might see some change?

Chandrasekaran: I would like to reinforce that we are pretty confident about our pipeline across markets.

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