Green shoots in BFSI and retail businesses helped TCS: V Ramakrishnan
V Ramakrishnan, CFO, K Krithivasan, Vice-President and Ajoyendra Mukherjee, EVP and Global Human Resources, TCS discuss with ET Now how steps taken by the company to augment and strengthen capabilities as well as get into more areas have started coming together.
TCS numbers were expected to be strong. Some may argue that the business and large deal environment is favourable and currency is a massive tailwind. It cannot get better than this for TCS.
V Ramakrishnan: One needs to look at two sectors which were quite soft in the last two years. Both BFSI and retail have started showing good signs and that has also helped. More importantly, our own strategy, the clear articulation of business 4.0 and how it is impacting many client organisations in terms of growth and transformation and the ability to bring together the solutions based on digital technologies, have all helped.
Everything is coming together. Some of the bets which we took are not necessarily bets but the steps which we took to augment and strengthen capabilities, get into more areas and the way we articulated our services strategy is coming together. As you said, currency has also helped and that is where we are.
Looking at your Q1 and Q2 numbers, one can see that dollar realisation has gone from 67 to about 70 and that is a big chunk. But margins guidance has not gone higher. Is this largely because you were investing in your business and you are happy to maintain that traditional margin band of yours?
V Ramakrishnan: We have been investing.
You have started investing more because there is tailwind now.
V Ramakrishnan: Yes we have been investing in research and innovation, from where many of our platforms have come. We have been investing in digital technologies, reskilling, creating labs and in developing on-location independent Agile in terms of work spaces. So all of this has been happening and we will continue to do that.
What about a perfect guidance bet based on where currency has moved?
V Ramakrishnan: We have said that our preferred band for the operating margin has been what has been stated. Currency always is an important factor. I do not think just on basis of one quarter, there should be an expectation of resetting that. We continue to stay focussed and we will continue to drive efficiencies. That is the overall strategy.
For the first time, TCS has gone on record and said that apart from large BFSI clients, medium and small BFSI clients are also making a comeback. Correct me if my understanding is wrong.
K Krithivasan: That is right yes.
Does that mean that the entire BFSI vertical which had issues because of slowdown in insurance, is looking good and the smaller clients are also coming back?
K Krithivasan: Rajesh said yesterday that growth is coming both from BFSI services as well as platforms. They are primarily platform deals. But the growth is 3.75% in the BFSI vertical and the platform deal has been reported as other platforms. Both are reporting very strong growth. We are not saying that growth is only because of the large deals that we signed up. There is all round growth across all geographies and all industries sub-verticals. There is very robust growth in every place.
Why has growth made a comeback? Why was growth missing three-four quarters ago, what has changed?
K Krithivasan: There is one reason from the US perspective. We believe that a more positive environment is coming in with tax reforms.
So this is not a sugar rush? Is this permanent?
K Krithivasan: There is a positive environment and regulatory environment is also softening up. People believe that it is going to continue for some time and they would continue to invest and also particularly in US there has not been much of investment in the last few years. Now the environment is also giving them the confidence to invest. Europe and Australia have been growing for us. In US, more positive momentum has been coming in.