Tata Consultancy Services (TCS) CEO K Krithivasan remains unconcerned about the financial gains from the recent major deal with the government-owned telecom company, Bharat Sanchar Nigam Limited (BSNL). Instead, the company's objective is focused on "nation building," aligning with TCS's strategic approach to government projects, which emphasises more than just profit margins.
During an interview with Moneycontrol, Krithivasan stated, "When considering the aspect of making money from the BSNL deal, there are two dimensions to consider. In the case of India, our perspective goes beyond mere financial gains. We consider ourselves an integral part of the nation-building process. We embrace this responsibility wholeheartedly, with our primary focus being on contributing to the development of our nation."
“And so we believe that if TCS cannot do it who else can. For certain programs which nobody else can do, we cannot be asking whether we are making money, as long as we are not losing money,” he added.
A consortium led by TCS recently bagged an Advance Purchase Order (APO) valued at over Rs 15,000 crore (around $1.8 billion) from BSNL to deploy 4G networks across India. The consortium also includes Tata Group's telecom gear-making company Tejas Networks, which will be responsible for supplying and servicing the Radio Access Networks (RAN) equipment.
TCS’ approach towards government projects has always been a bit different compared to its other IT companies. The company has shown a better track record and success rate too in the industry for running public-facing government services portals.
TCS uses these projects as training grounds to learn from the complexity and replicate this in projects for various countries. The IT services firm doesn’t focus on profit margins alone for such deals, the key takeaway remains the understanding of scale that comes from working on these projects.
It already successfully runs the Indian Railways’ IRCTC site, and India Post’s digital project. TCS' contract for running the Passport Seva Programme was renewed last year in a deal worth Rs. 8,000 crores, according to industry sources.
While for the overall IT services sector where the US and Europe are the key markets, India contributes less than 5 percent of the top IT firms’ revenue. Among them, TCS reported the highest contribution of revenue coming from India at 5 percent in FY23.
In comparison, Infosys earned 3.2 percent and Wipro reported 4 percent revenue from India respectively in FY23.
TCS reported its earnings for the first quarter of fiscal 2024 on July 12. The company’s performance remained muted on several counts amid increasing pressure in key segments such as financial services, hi-tech and telecom. The EBIT margins too were 130 bps to 23.2% on a QoQ basis, far from its aspirational 26-28% range.
The company’s revenue in dollar terms stood at $7.22 billion, in line with analyst estimates. Overall revenue growth for Q1 came in at 0.4 percent, its slowest in a decade excluding the Covid period, but the subdued earnings were on expected lines.
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