Demand continues to be very strong: TCS

IT major TCS is "watchful" of the market situation amid a strained geopolitical scenario and its consequent bearing on the global macro environment but the firm maintains a positive outlook on FY23 on the back of a strong demand momentum. "Overall, the demand environment continues to be very strong...there is a very strong market acceptance and our services are resonating very strongly with the market," chief executive officer and managing director Rajesh Gopinathan said in a post earnings media conference on Monday.

Gopinathan said that the pandemic has increasingly nudged businesses to prioritise spending on technology. Be it from the agility, building resilience or security perspectives, companies are betting on tech as it is the proven credible solution to mitigate operational hurdles. Geopolitical tensions have sure led to the rebalancing of the supply chain and businesses are focusing on inventory management but companies will be leaning on technology led interventions to streamline operations. "Yes there is a cost pressure but tech budgets are getting prioritised. Even when the semiconductor shortage came about, the solution to that came through technology. If there is a large scale squeeze, everybody will follow through…but the technology budgets will be among the last to be slashed when the squeeze happens," Gopinathan said.

As far as inflation is concerned, it is not a "demand collapsing agent" for the industry, the CEO said. "We are not in the financial services industry. So asset price whether it is up or down, does not necessarily change the demand for technological solutions," said Gopinathan. "And if you look at our customer base, typically balance sheets are in fairly good condition..so that's why their ability to spend is not dependent on what the level of the financial market is at. So, our view is that from a demand perspective, the impact on this industry is likely to be felt with a bit of a lag effect and will be lesser than other industries," Gopinathan explained while addressing a series of questions on the impact the geopolitical tensions and the unfolding macro volatility it can have on the IT sector.

TCS doesn't have direct operations in any of the (war) impacted countries. "We don't have a direct first level impact. First order impact is also very low for us from a commodity perspective etc. That of course has cascading impact in terms of both opportunities as well as challenges in our customer universe and we will have to stay nimble to make sure that we are participating where the opportunity is and minimising the impact where the challenges are," Gopinathan added.

TCS closed FY22, posting a record ₹9,926 crore in net profit in the January-March quarter while revenues touched ₹50,591 crore. The net profit recorded a 7% rise on a year-on-year basis. The management described Q4 as a "strong quarter" with growth led by North America in terms of geographies. During the same period last financial year, TCS had recorded a net profit of ₹9,246 crore and revenues of ₹43,705 crore. TCS wrapped up FY22 with the highest ever incremental revenue addition of $3.53 billion and a record TCV of $34.5 billion. For Q4FY22, the firm recorded a TCV of $11.3 billion which Gopinathan says is one of the "biggest positives of the quarter" and which included a couple of large deals worth close to a billion dollars. "Even excluding the very large deals, TCV is our highest ever at about $9.5 billion," said Gopinathan.

TCS has added a total of about 100,000 freshers in FY22 and plans to start the current financial year with about 40,000 fresher hires which will gradually be ramped up. Attrition rates though on an absolute basis is going up for TCS, it is plateauing in percentage terms. "Hopefully, by the time we get to June, we should see that we would have crusted the peak of this curve," said Gopinathan. Attrition rate for TCS stood at 17.4% during FY22.

Share price of TCS ended at ₹3,696.40 apiece on BSE on Monday, up 0.26%.