TCS plans lateral hiring; ups FY14 target to 50,000

After posting a better than expected earnings, Tata Consultancy Services (TCS) is confident of maintaining its margins going forward. Its management has also increased its hiring targets from 45,000 to 50,000 for FY14. Rajesh Gopinathan, its CFO and Ajoy Mukherjee, EVP and Global Head- HR elaborate on the company’s plans to CNBC-TV18. 

Also read: To be disciplined in bidding, aiming 26-28% margin: TCS Below is the edited transcript of their interview to CNBC-TV18. Q: A bunch of the gains that came in this quarter were because of currency. You maintain that margins will stay between 26 percent and 28 percent band. Gopinathan: We are fairly comfortable with the margin scenario. If you look at where the margins are currently, we did a gain of about 314 bps out of which about 310 bps is the impact of currency. We also have the impact due to the ALTI SA acquisition of about 30 bps and operational improvement of about 35-40 bps. So, we are fairly comfortable. We are able to absorb our business impacts and manage within a tight range and allow the currency volatility to flow through. That is the target operating model. As far as realisation goes; we have maintained that realisation will see quarterly ups and downs; the pricing environment remains stable. Q: But that doesn’t hurt margins in any fashion? Gopinathan: It has its own impact on it. Q: So, if in seven out of ten quarters realizations have dipped, does that continue to put a downward pressure on margins in some fashion? Gopinathan: If you look at the last four quarters, we have had two quarters of up and two quarters of down, so it fluctuates around a common range. Q: You announced some changes to your hiring plans as of yesterday. You want to take us through it in a little bit of detail and the impact this will have? Mukherjee: There are two aspects to the plan that we announced. One is, as far as the current fiscal is concerned, which is FY14, here we have said that initially we said we will be hiring 45,000. We have increased that to 50,000. So, that is about 5,000 increase as far as the gross hiring is concerned. Q: And most of that will be lateral hiring? Mukherjee: Most of that will be lateral hiring because our training hiring has already given out, 25,000 offers for the current year. Q: Is that more expensive hiring? Does it have any financial impact in terms of ethics? Mukherjee: It’s the overall pyramid that you need. It also relies on the kind of hiring that you are doing for whether it is the business services side, infrastructure or IT. Q: What kind of hiring you are going to do to fill the gap? Is there any financial impact so that we need to factor in given that you have upped your hiring plan for the year? Mukherjee: Why we are hiring more is because there is a demand and in order to fulfill that demand and we are improving that. We are going to manage that and as Rajesh said that our stated intent is between 26 to 28 percent then we will maintain that. Q: If your demand outlook is so strong and if volume growth is going to likely sustain with the exception of a dip in the next quarter or so because of seasonal factors, why is your hiring plan for next year in terms of campus hiring is the same as this year? Mukherjee: As far as campus next year is concerned, I have said 25, 000 – this is for FY15 is what we are going to hire. At this stage, that is the number that we are comfortable with. But is that’s the number that we will finally end up with? No. We do have another tool what we call as off campus hiring and we will invoke that and that usually we do after doing our campus then we will look at whether we need and that is done around September-October timeframe. Q: Should we anticipate a higher expense on account of wage hikes next year and in some fashion, the new hires that I am taking about? Mukherjee: For the new hires we are maintaining the same wage level as we have had so far at the entry level, so we are not changing that. Q: Give us a sense of where you see strengths and weaknesses geographically, service line, vertically. What should we expect in the next few quarters to come and I am including some of the early quarters of FY15 in this as well? Gopinathan: FY15 is too early to call right now. We are, with this going into the budgeting season and if you were to look at Q3-Q4, we do not see much of a difference between various sectors. We think that it is a broad-based environment that we have right now, as we have said both US and Europe continues to improve and I do not think between sectors there is much to call out. _PAGEBREAK_ Q: In terms of the big deal wins you have been adding on substantially on that front over the last several quarters – does that pipeline look very good for you in the quarters to come and can you give us some insight into the early quarters of FY15? Gopinathan: Our role is to call a trend as we see it. Last year we were among the earliest to call a slight upturn and we have been able to execute on that this year. As clarity appears, as we get better information we will call it out. Mukherjee: So far the discussions have been what Chandra mentioned we have not done anything negative so far. Q: He did give me the clue that you are having preliminary discussion so you will have some ideas of how that will pan out in the next few quarters? Mukherjee: That happens throughout the year. We are having our discussion but we are in the budgeting process. It will be very difficult to give any opinion at this point in time. We need to wait till February when we will have all the details; the budget from the customers and everything else.  Q: But broadly speaking everything is looking better. That’s been your commentary ever since the earnings were our day before yesterday? Gopinathan: We see it panning out the way we had called it in the beginning of the year.