TCS will hire more than 40,000 people this year: Milind Lakkad, EVP & CHRO

Samir Seksaria, Chief Financial Officer (CFO) and Milind Lakkad, EVP & CHRO at Tata Consultancy Services (TCS) talk about $ revenue growth, operating margins, Attrition rate, growth in different verticals, upskilling of people, order book, work from home facility provided to employees and changes in HR policies among others during an exclusive interview with Swati Khandelwal, Zee Business. Edited Excerpts:

Q: $ revenue growth came in at 2.8% is slightly lower than street expectations. What were the key reasons for this and do you expect to rebound and continue with higher growth in coming quarters?

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Samir Seksaria: As you said, our CC growth in the quarter stood at 2.4%. The main reason for that was that the core markets and verticals grew very healthy and we had 4.1% growth in the core market and verticals. This was slightly impacted by a little bit blip in India and few other regional markets that mainly because of the COVID situation, which was at its peak in April and May and things have started improving during the period. So, we expect that if the situation continues to improve, we should see recovery in these markets as well.

Q: In terms of operating margin, it came in at 25.5% vs 26.8% QoQ. What led to this and what level of margin would you sustain for the whole of FY22? 

Samir Seksaria: Our margins for the quarter stood at 25.5% in the quarter that is a decline of 130 basis points over the previous quarter. The primary impact was the rate increments which we gave effective from April 1, 2021, across the board and that impacted our margins by 170 basis points. Relatively, this was an offset by the exchange gains we got due to the rupee depreciation happening and that had an offset of approximately 30 basis points. On an overall long-term basis, we expect to sustain our margins in around the year, subject to the factors coming in. I would also like to call out some of our discretionary spendings has started picking up and we expect some of it to recover and some of it to go to the pre-pandemic levels as we see overall recovery and business coming back as usual. We have our drivers and are pretty confident in sustaining the margins.

Q: The Company had an attrition rate of 8.6%. What were the reasons and do you think this level will rise and how do you plan to manage it? Also, what attrition levels would you expect in the future?

Milind Lakkad: The job market is quite hot. Due to the pandemic, our attrition levels are at artificial 7.2-8.6%, still an artificial form of pandemic standpoint. If you look at the past then normally our attrition levels stay between 11-12% levels and amid the peak demand it has also touched the 13-14% levels in the past. It is so that all these things fall under a part of our operating model and we have managed it in the past, do it now and will continue to do it in the future as well. So, attrition is there, the market is hot and it would increase in the future and we are ready for it. We are used to that and our operating model takes care of it.

Q: Have people started coming to the office and are you applying the hybrid model that we were talking about? How you are seeing as a fair amount of period has gone by for the company to decide the model of work, .i.e work from home Vs work from office or a hybrid version? What percentage of people are working out of office and home and what would be the trend in the future?

Milind Lakkad: Currently, 96% of people are still working from home. There is no change in the number that I talked about in the last quarter. The overall situation is that in the last two months, we did a lot of work including the vaccination drive and 73% of our people are already vaccinated and have received one shot. It is so that these things are preparation for basically coming back to work. To make the workplace safe, which is already safe, we are also vaccinating all of our associates and we expect that all our associates are vaccinated by September 30. During this period, we will gradually bring back people to the office. Hybrid and office both will be there in place. Initially, it will be tried in certain businesses and slowly bring everyone back to the office. Everyone should be prepared to come back to the office.

Q: There was an all-around growth across all the verticals sequentially, with BFSI vertical showing impressive growth of 3.1% and retail 4.4%. Would BFSI and retail verticals continue to be the growth drivers and going forward what will be the view on these verticals in the next few quarters? From where are you getting maximum growth? Market-wise also, Continental Europe showed 1.5% growth QoQ. What were the reasons for this fall, and more importantly how is the demand aspect in Europe? 

Samir Seksaria: If you will see then BFSI and retail are our biggest verticals and a large portion of our revenue comes from these two largest verticals for us. And growth has been good and an uptick in both the BFSI and retail. If you will have a look at the retail, after the softness due to the pandemic, transportation has started coming up. Our retail has come back to the double-digit on a year-on-year basis and that is an uptick in airlines in the Americas. Even in the BFSI, the overall uptick is being seen in North America. Coming back to geographical segments the growth in the US has been 4.1% in sequential terms, the UK has also been strong at 3.6%, whereas Europe was soft in this quarter on the back of very strong Q4, where we had 8.5% CC on a QoQ basis. So, Europe will have to wait and watch. It is also about things, how they are opening up across various regions. And, primarily it is on the back of very strong growth in Europe where we see softness. There might be there will be some consolidation, which may continue for some more quarters. But overall from demand, deals and overall prospects wise, Europe continues to be very strong.

Q: Since there is more demand coming in from digital contracts and you have addressed in the past as well and constant upskilling of your employees to handle those kinds of projects is going on but what kind of hiring trends are visible and what are the areas where demand is highest?

Milind Lakkad: In our operating model, we bring people from the campus. Last year, we brought 40,000 people last year and more than 40,000 people will be brought this year. We have complete talent development machinery with us basically to get them ready for the project even before they join and it is working well. 80% of our people are project ready even before they join TCS. So, that machinery works well for us. Secondly, lateral hiring depends upon the demand for our specific vertical but a lot of it is all-digital whether it is cybersecurity, analytics or even very specific technology which is required for some specific industries. All-round hiring is going on and at a large volume.

Q: We saw an order book of $8.1 bn. From which verticals, you have the highest amount of TCVs and what's the deal pipeline ahead for Q2 and Q3?

Samir Seksaria: Our order book has been very broad-based and it has come across the entire spectrum. If you look at it from a geographic perspective, orders are deal wins across Australia to the US. Even from the vertical perspective, it is very broad-based. We would not like to call out the pipeline for Q2 and Q3 but we continue to see the pipeline getting strong.

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Q: For FY22, overall what is the outlook because of the COVID situation has there been any changes in your HR policies which is to support the staff better and also to upskill them? Can you please highlight some points about the steps taken by HR? Also, update us about spends that you are seeing to upgrade and train your employees?

Milind Lakkad: We continuously keep changing our policies to meet our business needs and more importantly our associate needs. For instance, we have launched a vaccination policy at present and the primary rationale behind it was to keep our people strong, healthy and we also are healthy and when they come to the office, their colleagues continue to be in good health. So, it is a big drive that we have launched in the last two months and as I have already said that the last percentage – more than 70% - have been vaccinated. So, this is a major change. In the case of learning and development, we continuously ensure that we get the best talent from the market, for instance, from IMA ABC, we are the largest hirer from those institutions. We continue getting the best talent from the market, getting the best candidate from the premium institutions in India and across the globe. The most important thing for us is that we continue with our talent development in everything in two ways, strategically, so that in the future – in two to three years – what has to be done and what should be done in the next quarter. We focus on both of these factors and pay attention to talent development. Along these lines, we develop policies to make sure that our people are also benefitted from this process.