In February this year, Rajesh Gopinathan took over as the Chief Financial Officer of Tata Consultancy Services (TCS), stepping in to the shoes of company veteran Sethuraman Mahalingam.

Replacing Mahalingam, who is credited with setting up the IT’s major’s financial department, is not a simple task. Neither is managing the financials of the country’s largest software exporter.

Gopinathan, who has been with the company since 2001, says he has just faced a “few opening balls”. In a tête-à-tête with Business Line , Gopinathan says TCS is seeing demand up-tick from the US and Europe, while domestic inflation is a worry and infrastructure is another pain point. Excerpts:

How has been the journey so far?

I have been with the group for a long time, I know all the people internally. We have a stable team. My big unknown is the external side, the investor community, and my first focus is to win their comfort. On the investor side, I have covered New York, London, Hong Kong and Singapore. If I am not able to win investor confidence then they will have to drag Chandra (TCS CEO and Managing Director N. Chandrasekaran) in and that would take a toll on his time. A few opening balls have been faced.

Are you re-looking at your hedging strategy such as increasing the amount or changing the tenure of hedges?

For the last two years, we have taken a slightly different approach. We now cover one to two quarters and we hedge our receivables fully. The idea being that if I bill something, from the day I build to the day I collect, I don’t want any volatility. On the revenue side, we take about one to two quarters on a rolling basis. That strategy will continue. The longer the book, the bigger is the accounting impact. All of us agree that long-term hedges provide a stable window to operate for the next one or two years. But we are all slaves to the accounting numbers, we acknowledge.

You would prefer a steady rupee as its volatility is worrying?

We are able to plan better if the rupee trades in a steady range. A steady rupee also gives stability to the market, while its volatility creates trouble.

How critical are the market swings to TCS?

We are primarily focused on the guys who have a core holding. So if you look at it, the core holding has been fairly concentrated. Bulk of it comes from overseas, purely because of the amount of work we have overseas.

If you have the core investors with you, when the stock gets hammered, they will come in and provide the support. We don’t want sentiments to suffer. We understand that we need the hedge funds for price discovery, as they provide float in the market, they provide some amount of action on the stock. They also set the price points, which allow the larger guys to come in.

What is your outlook for the year? What are your capex plans?

This year would be better for us than last year, and we hope to do better than industry average. TCS will better the 12-14 per cent growth range set by Nasscom. Our capex would be about Rs 2,600 crore, of which 80 per cent would be for infrastructure.

Since TCS is an India-based company, what are the challenges you face at the domestic level?

Inflation is a worry as we will not be able to pass it on to customers. We have been able to contain wage inflation in the single digit range, but that is a reflection of the demand environment.

If the demand environment picks up and underlying inflation trends are as strong as it is, wage inflation would go back to the 15 per cent level, which would be a problem. Another pain point is infrastructure. Our delivery centres run on DG sets (diesel generators) as there is certainty of (steady) power supply. One cannot expect companies like us to get into setting up alternate power sources to ensure power supply.

Which are geographies and the sectors that are growing?

We started calling this out late last year that there is a broad-based bottoming out in the US, and that is what is leading to the demand up-tick. We are seeing project-specific spends coming back. Companies are now trying out new technologies, so the US market is a much more optimistic market. The data points we see are positive.

Due to the economic discomfort that the Europe is currently in, there is greater pragmatism with regards to the regulations and labour laws. There is a greater intent to find a way to protect companies rather trying to close everything and loose. That pragmatism is leading to greater penetration in Europe. As you see, Europe business for us is all about large deals for us would be large deals.

Europe demand is growing because of penetration; US demand is growing because of the underlying economic demand pulling it.

rajesh.kurup@thehindu.co.in

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