The Hindu Business Line : Infrastructure management key to large outsourcing deals: TCS

Mumbai, Nov. 9 IT bellwether Tata Consultancy Services (TCS) has been in the limelight of late. The company bettered street estimates to clock a 22.8 per cent rise in Q2 net, bagged a $1.2-billion outsourcing contract with Nielsen Company and announced the formation of a subsidiary in South Africa, all in the space of a fortnight.

Today, TCS became the first Indian company to be named among the top 10 in the annual FinTech 100 list of financial industry technology vendors.

Business Line caught up with the financial brain of TCS, Mr S. Mahalingam, CFO, who spoke about the company’s infrastructure services, rupee appreciation and a host of other issues.

In the quarter gone by, the infrastructure practice of TCS witnessed a 33 per cent growth? Is it a sign of things to come?

A 33 per cent rise may not be possible in every quarter, but the infrastructure practice is a very important business for TCS. The ability to manage infrastructure is in line with our strategy to offer full services play. If we do not have this service or if the service does not grow significantly, we will not be able to pitch for complete outsourcing deals at a later day. Infrastructure management will become very crucial as we get into more and more large deals. Companies such as EDS, CSC and IBM have been able to fetch large ticket deals globally because of their ability to manage infrastructure for their clients. Most of the services in this space are offered remotely. Going forward, when we develop a lot of local capabilities, we might look at other aspects of infrastructure management such as desktop management.

In this operating environment, how important is it to have your hedge position aligned to the total amount of deliverables you expect in a particular quarter.

It is very important to do so as one does not want to get surprised at different levels in a quarter. If you look at the last quarter, we started with the rupee at Rs 40.5. The rupee started appreciating and went beyond 41. However, by the end of the quarter it came down to 39 levels. Thus, my first priority is to protect the rate at which I get my receivable. Secondly I have to decide what to do with the revenues itself. I cannot change things once I enter into the quarter, so I make sure that a fixed stream of revenues is ensured. I should move to ensure that 100 per cent of my deliverables are arranged in such a manner; this may not be possible as there is a cost associated with doing so.

Is quoting in rupees (for overseas clients) an alternative for tiding the appreciating rupee?

Rupee is a stronger currency today, but it may or may not stay this way for long. Fundamentally, the Indian economy has a trade deficit and a current account deficit. So the natural course is for the rupee to depreciate, as the dollar ought to be in demand. However, FII funds have been keeping the rupee afloat. If there is a drastic change in the interest rate regime or in the carry trade requirement, the inflow of funds may get affected. If that happens, the rupee will depreciate. So I can never be comfortable because India is not like China where there is a trade surplus and a current account surplus. So I do not want to get into a contract where I quote in rupees and then take the burden if the rupee appreciates.

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