TCS has a broad-based and healthy pipeline: Samir Seksaria, CFO

Samir Seksaria, Chief Financial Officer (CFO), Tata Consultancy Services (TCS), talks about the Q4FY22 numbers, operating margin, order book, the hybrid model of work and attrition among others during an exclusive interview with Swati Khandelwal, Zee Business.

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Edited Excerpts:

Q: The company's Q4FY22 numbers are very strong and FY22 incremental revenue is the highest ever. What is your view on the numbers and how will you summarize the quarter?

A: Q4FY22 has been a landmark quarter for us. This is the first time when we attained the milestone of crossing a quarterly revenue of Rs 50,000 crore. The overall growth has been around 14.5% for the quarter and if we look at the full year (FY22) then the overall revenue stood at Rs 1.91 lakh crore or $25.7 billion. Our full-year growth has been at mid-teens levels and stood at 15.4%. During the period, we were able to sustain margins. We have added more than 1 lakh employees in FY22 of which 35,000 net new employees were added in Q4FY22. We have a team of almost 6 lakh employees (5.92 lakh) at TCS at present. Overall, in the terms of growth, North America has been a pillar of our growth throughout the year for us. If we look at the full year then the UK and Europe have also contributed a good revenue. If seen industry-wise, every industry has contributed but it was led by retail as retail growth was more than 20%. At the same time, life sciences, manufacturing, and Deccan services have been around 19% (life sciences and manufacturing specifically). BFSI, which had good growth last year, has delivered a decent growth on that base year as well. So, overall, it is a broad-based growth that was visible across markets and industries.

Q: Your operating margin came in at 25%, which is flat. What led to this and what level of margin would you sustain for the whole of FY23 as the hiring spree is at top gear along with wage inflation?

A: The 25% margin has been delivered. We, Milind Lakkad and I have been telling that supply-side challenges have been seen and we are making tactical interventions through the period to ensure whatever is required to meet this gap and ensure that the growth is not impacted. We expect that it will continue. If we have a look at the fourth quarter then we had an incremental impact on margins of almost 90 basis points due to various tactical interventions or an increase in job external consultants. Balancing that was operational efficiency, which we could get on many line items on manpower itself and discretionary expenses. If we will look into the future as you called out inflationary pressure and macro are different, so headwinds are there. We had declared our salary increments also. Usually, it had an impact in the first quarter. Then we are able to use our operational levers in terms of getting better margins through the year and we will expect that it should continue in FY23 as well. As far as margin band is concerned, 26-28% is our guidance and that is something which we feel that on a long term basis our strategy and our cost models are built to deliver in that 26-28%.

Q: We saw the highest ever order book. From which verticals, do you have the highest amount of TCVs and what's the deal pipeline ahead for the next 2 quarters?

A: $11.3 billion was the TCV in Q4 and that included two deals close to $1 million, so, there were two mega-deals. If you have a look at the overall pipeline then it is broad-based and healthy as of now. Even the macro, which we are looking at across, we are very positive but staying vigilant.

Q: Has your travel cost started going up as the economy is opening up and travel has started, if yes, what is your view on the travel cost element? Also, you had a split in form of a hybrid model of work. What is an update on that front work from home Vs people coming to the office?

A: At the start of the year, we said that the discretionary expenses will start coming up and they have played through the quarters. Discretionary expenses not only travel but also other discretionary expenses also are coming up. And we expect them to continue with more and more normalisation coming back globally. Our travel expenses were a bit subdued in the fourth quarter because travel during Q4FY22, specifically in January and February, was a bit sluggish and there were some alterations on Visa expenses also during the quarter. But, overall travel expenses should jump in their form. From the hybrid model perspective, what we have been seeing is that lot of our seniors have started coming back and operating from the office for a couple of days or more. We expect an increase in the count as we get into the quarter.

Q: How is the attrition levels at present and have the things settled down a bit from the past and how will you tackle it if the situation remains a little tough on that front?

A: In the last few months, we have seen that our monthly attrition numbers are plateauing, so it is plateauing down and we expect the trend to continue. The attrition number we quote is on the last 12 months basis and it is at 17.4. It is just the arithmetic of the overall average of the last 12 months and that is likely to edge up a bit in the next few quarters. But the trend which we are looking at is plateauing.

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