Level of tolerance between a disaster quarter and a great quarter is 50 basis points: TCS CEO Rajesh Gopinathan

Rajesh Gopinathan, CEO, TCS

Rajesh Gopinathan, the chief of Tata Consultancy Services (TCS) presented what was his 40th earnings as a top executive of India’s largest IT firm on January 9, 2022.

While TCS’ revenues came ahead of expectations, its cautious commentary, lower deal wins and decline in headcount made investors nervous, with its shares falling 2.34 percent on January 10. On cue, shares of its rivals such as Infosys, HCL Tech and Wipro, which are set to report earnings this week, were in the red.

In an interview with Moneycontrol, Gopinathan reflected on his years as CFO and CEO presenting earnings, stating that the one thing that is very predictable is the intensity of each quarter.

“I keep joking, between a disaster quarter and a great quarter, the level of tolerance is 50 basis points. It is amazing how much we track on an annual basis. But overall, it has been a good ride I think,” he said.

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Talking about the predictability in TCS earnings, he said, “No surprises is the best outcome of it. Most of what we say, and both our performance, our commentary, our philosophy, all of it is now well understood by the market. And there aren’t too many surprises, if anything, that boredom is our bigger risk, rather than any major surprise.”

TCS’ earnings for the third quarter ended December were broadly in-line, with constant currency revenue growth of 2.2% quarter on quarter and EBIT margins of 24.5%. However, deal wins were weak at $7.8 billion vs $8.1 billion in the previous quarter and the headcount fell sequentially by over 2,000. While the management was confident about demand in North America and the UK, Europe outlook remained uncertain.

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“UK accounts for about two-third of our business, so we are quite comfortable. In Europe, we have a very strong presence on the ground. We should be able to navigate it and on a relative basis we should be able to navigate Europe well compared to all other players. So, we are confident about our ability to play Europe,” he said earlier.