TCS CEO & MD Krithivasan Exclusively On Moneycontrol | TCS Q3 Earnings | MC Exclusive | N18L
📅 Jan 12, 2025moneycontrol15 MIN1364 VIEWS18 SEGMENTS · 3 SPEAKERS
CEO and MD of Tata Consultancy Services Mr K Krithivasan speaks exclusively to Moneycontrol's Chandra R Srikanth and Debangana Ghosh on Q3 earnings of TCS.
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Questions asked in this interview
7
3:04What are clients telling you as they form budgets for next year?
6:00Where is this deal in terms of completion, how do you plan to replace it, and how much did the revenue slowdown this quarter impact the growth?
7:40Is this growth sustainable, and how do you plan to expand the India business?
9:26Is this due to automation or the impact of AI?
Hello and welcome to this earnings interview of India's largest IT company, TCS, which has just reported earnings for the third quarter. On the face of it, it appears to be a mixed bag. Revenue in rupee and dollar terms declined quarter on quarter, and the third quarter is also seasonally weak. But the PAT number is up 4% quarter on quarter with better operational efficiencies. What's positive is the outlook and management commentary. To understand more, we are joined by its CEO K. Krithivasan. Thank you very much, sir, for joining us on Moneycontrol. Also joining me is my colleague Debanga Goos. Thank you very much, K. Krithivasan, for talking to Moneycontrol. Let me start with Q3. It was slightly underwhelming, and Q3 traditionally doesn't do well due to furloughs. But other indicators like TCV of over $10 billion, robust campus hiring, and the view that CY25 will be better than CY24 are promising. Give us a sense of what you're seeing in demand, because your overriding message seems to be: don't look at Q3, look at our outlook. It's positive.
That's precisely the point. Our TCV has been very strong, and across geographies and industry verticals, order booking has been good. The pipeline continues to be robust. In Europe, TCV is probably at an all-time high this quarter. We are seeing more transformative engagements compared to the past, with an increasing percentage of discretionary projects. The deal cycle has decreased by a few weeks for the first time in a while, which is a positive indicator. All this gives us confidence that there are early signs of revival in discretionary spend, and technology spending next year could have a positive bias.
How worried are you about what happens when Trump takes charge in the US? Setting aside the visa issue, he has indicated tariffs, which could lead to inflation, affect interest rates, and impact corporate spending. Have you baked that into your forecast? What are clients telling you as they form budgets for next year?
Most of our customers believe that policies will be aimed at accelerating the US economy, giving it a positive boost. So they are positive at this time. They don't think the policies will grind things down. There will always be interest in how to enhance and accelerate. Life sciences and healthcare are watching for insurance and Medicare policies, while banking and retail have better consumer confidence and are looking to enhance discretionary spend. Of course, we can't guess specific policies, but the current view is that it will be net positive.
Right. I want to touch upon the BSNL deal. A recent JM Financial report said the revenue contribution from the BSNL deal has passed its peak phase. Where is this deal in terms of completion, how do you plan to replace it, and how much did the revenue slowdown this quarter impact the growth?
About 70,000 sites have been installed, and 60,000 are carrying commercial traffic. We hope to complete it by Q4 or Q1. Most of the revenue will run down by Q4 or Q1, with some in Q2. Between Q2 and Q3, there isn't a substantial difference in BSNL revenue. We will see BSNL revenue tapering down going forward. We seek to replace that revenue through other international projects, new TCVs we have won, and increasing revenue through regional markets. We continue to look for opportunities to replace it.
Coming to the India region. In the past couple of quarters, growth has been largely driven by the Indian market, which saw over 70% growth this quarter. During the media conference, you said Q3 growth was not largely from BSNL but due to seasonality benefits in the India market. Is this growth sustainable, and how do you plan to expand the India business?
We've seen India business growing quarter after quarter. We are enhancing our focus. Traditionally, our India business has been BFSI-focused services. We are reaching out to other industries and bringing global talent to India to bring global value. Similarly, we are expanding sales operations in the Middle East, Africa, Latin America, and Asia Pacific. We are broadening regional market sales and delivery capability. Our belief is that India and other emerging markets together will substantially replace BSNL revenue, but the rest depends on global revenue.
On the one hand, your commentary on hiring is positive, with 40,000 trainees on track. On the other hand, headcount shrunk by 5,370 in Q3, reversing two quarters of growth. At the press conference, you said it's no longer apple-to-apple headcount growth and revenue growth. Why is that? Is this due to automation or the impact of AI?
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