'This is the most challenging time'

Q&A: N Chandrasekaran & S Mahalingam

Tata Consultancy Services’ (TCS) Q2 numbers were below market expectations. Substantial forex loss and turmoil in the US and the BFSI sector impacted the country's largest IT services company.

However, N Chandrasekaran, chief operating officer and executive director, and S Mahalingam, chief financial officer and executive director, in an interview with Shivani Shinde, insisted that the future is not as bleak as it is being perceived.

How grave is the situation this time around?

Mahalingam: Compared to the last 40 years (of TCS' existence), this is by far the most challenging time. The last nine months, in particular, were quite challenging. Some of our top financial services customers were in a difficult situation.

Moreover, this quarter has seen some really violent changes. Some customers have vanished, besides, other firms were going through their own transformation and restructuring, because of which contract ramp-ups got delayed. It will still take time to understand the budgeting trend.

Going ahead, can you give us a sense of growth and the client mood?

Chandrasekaran: We have a large number of clients in the $1-50 million segment, which needs to be ramped up. While we will grow in all emerging markets, we will look at the established market in the US, the UK, Europe and be very client-focused and add new clients. It has clearly worked during this quarter with 51 client additions.

What is your strategy with regard to the rupee?

Mahalingam: We have managed to show that we can grow. Even in this slowing demand scenario, we have delivered on numbers. As for hedging, while one could have done better, we did not want to get into any jerky reactions.

We have kept some of the positions open. Some are at levels that are pretty low and then there are some at the level of Rs 46. To take a position on currency in this environment is difficult. We have got limited participation until $190 million and something beyond it. But a depreciating rupee does good for the business.

The revenue contribution from India was down by 17 per cent ...

Chandrasekaran: The India business is very volatile. Contracts in India are project, rather than annuity-based. Besides, I would rather prefer to look at India business on a yearly basis rather than a quarterly one. Overall, we have done well in the India business. We have some deals and we will be announcing a few more. My focus will be to try and reduce the volatility in the longer time.

How is the BPO business growing and will it focus on the domestic market as well?

Chandrasekaran: Our margins are up and we announced one financial services BPO deal this quarter. We are beginning to see ramp-ups from the pharma and retail sectors too.

Our BPO strategy remains the same. There is a huge amount of back-office work that needs to be done in India as well. But it will certainly not be headcount-intensive.

Would the company look at a buy-back option?

Mahalingam: We are not looking at that option. Buy-backs are resorted to if you have a lot of money. We have just done an acquisition and there are other ways of using cash.