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Share buybacks will be part of TCS’ overall capital adequacy: N Ganapathy Subramaniam, COO


After getting into a double-digit strategy growth, there is no point in going back, asserts V Ramakrishnan, CFO, TCS. The order pipeline is good and its ability to add another cylinder to a running car is well tested, he says further. ETNow's Nikunj Dalmia also caught up with N Ganapathy Subramaniam, COO and ED.

Edited excerpts:

I just want to clear the air on the electoral bonds, from a market standpoint from a viewer standpoint because over the years I have traced TCS. I have never heard you commit such a large number to the electoral bond, why has this need come suddenly?

V Ramakrishnan: First of all, it is not an electoral bond, there is a difference between that and this is a contribution to an electoral trust. This trust has been set up by the Tata Group and it has been in existence for at least 6-7 years.

What is the purpose of the trust?

V Ramakrishnan: It is essentially to contribute to campaigning or financing in a very transparent, open manner. That is the objective of the trust. This is a contribution in that regard.

TCS is 50 years old, you have never contributed that much, suddenly why are you contributing Rs 220 crore?

V Ramakrishnan: We have contributed in the past much smaller amount, but there is always a beginning, there is always a beginning to anything. So it has happened, it is an election this year. So it has happened.

When you say it is a beginning, what are you trying to indicate?

V Ramakrishnan: No, I am saying when you say if we have not done anything in the past, and when you do it first time, it is a first time.

What we should be focussing on is customer interaction. What has changed in between quarters, a few quarters ago when we met, you were confident, right now the numbers are just speaking for themselves, $6 billion of order book, great order wins, what has changed so much? Because the headline for US economy is that economy is going to slow down, the headline for the US economy is that the tax rate sugar cut which American economy enjoyed is getting over, but your business touch wood is growing phenomenally?

N Ganapathy Subramaniam: At the outset, it has been a standout year for us and we said we will get back to double-digit growth, the management team was extremely focussed on it, happy where we are today, happy as to how we are entering the new year.

The second point is there are always macroeconomic issues and we have always maintained that we have to go out there, look at clients where they are investing, what is the growth innovation and efficiency stories that will play out for them and then participate in all of that.

And then, we clearly crafted our top leadership framework in terms of business 4.0, workplace, workforce transformation in order to participate in large digital engagement. You need all of this come together so that we can stitch together and participate in those opportunities. This is exactly what we have done.

If you take the UK or Europe as a market, Brexit was one of the most talked about items of the last four quarters, but we always maintained that Brexit is there but then there are always opportunities. So the UK has grown 22 per cent year-on-year, 18 per cent, that is Europe. Overall, you know, our focus in terms of investing in the opportunities and making most of it is clearly paying.

How confident are you as we migrate to a new financial year?

N Ganapathy Subramaniam: Last quarter, margins were a bit weak, and we have consciously invested and acquired talent and then said we can participate in this.

We will never shy away from that, we will always keep investing in it and launched about 20 plus digital offerings through the year. Each one of these offerings is picking up and we have clearly an exit rate which is going to help us at least a percentage point ahead of what we had last year.

So overall, having worked hard and focussed in terms of getting into a double-digit strategy growth, there is no point in going back.

Is double digit the new normal for TCS?

N Ganapathy Subramaniam: As I said, look that is a good goal to have certainly and then you know…

Is it an achievable goal?

N Ganapathy Subramaniam: See, I will put it this way. I think from an operations perspective, having set a vision or a goal that we got to get back to double digit growth rallied the whole company behind that.

There is no point in going back. We continue to work on that, some of the strategies and the investment that we have made are paying off. I think we will continue to leverage that and I would say there is a solid foundation and we have to use that foundation and leapfrog from here.

To summarise your comment, if macros do not go bad as per your press conference or press release, double digit growth is the new normal, yes or no?

N Ganapathy Subramaniam: There is always a new normal and as I said look we would like to be in that kind of a position. Personally, I feel that I am more confident than where we are entering the new year and the opportunities.

And we have signed a good deal pipeline and the pipeline is good, $6.2 billion worth of contracts signing happened in the fourth quarter alone. Then we are working on good opportunities. From where I stand, we are looking good.

It is good to see that confidence. I have not heard you that confident and bullish. The specifics are that you had rupee tailwinds last year, that was huge, some of the rupee advantage might have got negated because of cross currency and other currencies you deal in. But the rupee was definitely an advantage.

What will you do this year if the rupee tailwind does not come in, in terms of margin maintenance because you are at a large base. Now are you confident of getting all the levers back?

V Ramakrishnan: See, rupee depreciation is sort of intrinsic into our model. Obviously last year, while rupee depreciation impact was there, the benefit was there. It helped take care of the increases. If you really look at the numbers, what you got by the currency was sort of neutralised with whatever increases and compensations and things like that.

What happens this year, let us say rupee stays at 70?

V Ramakrishnan: If there is a sharp rupee appreciation, it will have an impact. But within a certain narrow range, it is always baked into our environment and we manage. There are still levers which we can work with, but individually none of them will be huge. But together they still have the opportunity to make our margins resilient. And that is what you have seen also over the past periods.

Rajesh was confident, NGS is super confident, order book has gone up, base effect has kicked in, leverage is on your side, but what is stopping you from going back to your peak margins? If business is growing at its peak, if order book is at its peak, if the client optimism is at its peak, why are your margins not there?

V Ramakrishnan: Some of them have to be qualified. So client confidence cannot be everywhere.

These are not the best margins with the best growth? All I am saying is the order book, the visibility, the environment in the last three or four years, this is the best I have heard you guys over the years. With this, I was hoping that I would get a better margin picture, that is my limited point, why is that not happening?

V Ramakrishnan: We have actually expanded our margins by 79 bps compared to the last year.

But that is not the best?

V Ramakrishnan: That is clearly coming out of the levers and operational efficiencies. From that perspective, I think we are quite very satisfied with where we are and on the trajectory. We do not see this as an overwhelming factor.

Four quarters ago when we met, you said the aspiration is to get back to double digits and you have achieved that, what is this goal number this year, what is TCS rallying around this year? What is that new aspiration which you would be rallying the organisation around?

N Ganapathy Subramaniam: Participate in more and more growth and transformation engagements.

Is there a number you are chasing? Double digit was a number…

N Ganapathy Subramaniam: Putting a number, I think we will be limiting ourselves. There are enough opportunities out there and we need to go and participate in every growth and transformation opportunity and we need to make sure we rapidly deliver the business value our customers are expecting.

Are we at an explosion of that kind of a demand coming from your key customers, the digital is growing at 50 per cent at a $6 billion base. The word I would like to use is explosion because that is explosive demand?

N Ganapathy Subramaniam: There is demand out there as I said. We are out there to capture that demand. Second is we have hired, we have added net about 30,000 people this year from an offer perspective. We have given about 30,000 offers already from a talent test that we do in a democratic way.

See overall, we are gearing ourselves for capturing the demand, no doubt about it. In all our major markets, every single market we are operating is growing at double digits except the Middle East and Africa. US' is 9.9 per cent and it is gettinRead More – Source