Tata Consultancy Services (TCS) may have reported sluggish growth in the quarter gone by, but the optimism in Chief Executive Officer N Chandrasekaran’s voice is palpable. He believes the company is on a strong wicket in the new calendar year. “From what our clients tell us, their IT budgets may either be flat or go up. This augurs well for our business,” Chandrasekaran, who is also the company’s Managing Director, said in an interview with Business Line . (TCS on Thursday reported a 5.1 per cent increase in net profit at ₹5,441 crore for the quarter ended December 31, compared to ₹5,197 crore in the corresponding period last year). Edited excerpts.
Analysts seem to be slightly concerned about slow volume growth in the third quarter. What’s your take on it?
For a seasonally weak quarter, these are very good numbers. Firstly, client matrix is very healthy as we have added clients across revenue bands. Secondly, growth is broad-based as we have done well in the UK, Continental Europe, India and Latin America. With the exception of insurance and energy, all industries are doing well for us. In the second quarter, we had highlighted three headwinds—Latin America, retail sector and our UK subsidiary Diligenta. The problems in Latin America and the retail space are behind us and we are looking forward to growth. Volumes are bound to drop in a quarter where there are furloughs and fewer working days. One has to distinguish between volume slowdown because of the nature of the quarter, versus volume drop due to ramp-downs. There were no ramp-downs in our case
At the beginning of the year, you had said TCS will grow faster than industry body Nasscom’s prediction for 2014-15. Do you still maintain that? Is the outlook for the next fiscal better?
We were ahead of Nasscom’s projection last year and we will be comfortably ahead of it this year as well. The IT industry has tremendous potential to grow, given the fast pace of technology evolution. We are moving from a knowledge economy to digital consumer economy.
No company can do that on its own and, hence, we have been preparing ourselves for this opportunity by training staffers.
TCS’ move to cut jobs has created quite a stir on social media despite the company saying the numbers were in line with those of last year. Industry circles are abuzz that 25,000-30,000 jobs may be cut…
To my mind, it’s a ‘business as usual’ process, which should have never created noise on social media. What we have said is that 1 per cent involuntary attritions would happen this year on a base of over 3 lakh employees. We have no idea where the 25,000-30,000 job reduction numbers have come from. In hindsight, I don’t know if we should have come out early and given out the actual retrenchment numbers. Why all this happened remains a mystery to me. Is it logical that a company with 86 per cent utilisation, which is delivering industry leading growth, will cut 25,000 jobs?
TCS has always been known as a stable employer. Is the tolerance level for non-performers now coming down?
In TCS, people have long career cycles. Our model is to retain people so that every time there is a technology shift, we have trained talent to tackle it.
However, performance is very important. Our HR department does not have a policy to take a decision on the basis of one rank or one-year rating. It’s a multiple year process that we have taken.
The Madras High Court on Tuesday restrained TCS from retrenching a woman employee. The management did not give any notice of retrenchment, as required under the Industrial Disputes Act, she said in the petition. Is that a matter of concern for TCS?
We haven’t got the order yet, but we will deal with it. I cannot comment anything at this stage.
Many of TCS’ peers are closely associating themselves with start-ups. Recently, Infosys has pledged to invest $250 million in Indian start-ups. Do you have a similar road map?
Well, we have a mechanism of partnering with start-ups through our co-innovation (COIN) network. Through this, we work with a large number of start-ups, monitor them and bring them in front of clients when needed. However, we do not invest in start-ups.
Energy was a slow sector for the company in third quarter. Could you articulate what are the challenges there?
There’s lot of pressure on clients due to falling oil prices. Energy, along with the insurance space, will continue to be headwinds for us.