Q&A: N Chandrasekaran, Chief Executive, TCS

'Growth in Europe is important for us'

The country’s largest information technology exporter, Tata Consultancy Services (TCS), which currently derives about 27 per cent of its revenues from Europe, says though European companies lag behind their counterparts in the US in terms of outlook, Europe still is their priority. Chief Executive N Chandrasekaran, who was in Hyderabad to open their learning centre on Tuesday, shares with mediapersons the company’s strategy for Europe, including inorganic growth, attrition levels and impact that Japan had on its top line. Edited excerpts:

How focused are you on Europe?
Europe is a very important market for us and we derive close to 27 per cent of revenues from there. From a market-specific point of view, however, US leads and Europe lags. But Europe is our priority.  

Any inorganic growth plans?
We do not have any plan to buy just for the sake of growth. However, we are always on the lookout for companies which can bring certain expertise in terms of domain or in terms of a particular market such as Germany or other parts of Europe in sectors like healthcare. But there is nothing definitive at this point.  

Did the situations in Japan or North Africa have any impact on the company?
What has happened in Japan was unfortunate. We have a number of employees there, locals and Indians. Our Indian staff had returned but are ready to go back. Also, we have a lot of customers in Japan. Good thing is, all of our staff are safe. But from a business perspective, Japan will put a temporary break in terms of business activities, though our revenues from the country is small. The devastation will have a small impact on the immediate quarter and in the near-term. But we are now more focused on ensuring that things there return to normal.

In North Africa and Middle East, we do not have much presence in the countries that had been affected by the political unrest. There will be no impact there.

How has been your deal pipeline?
The pipeline is mostly in the BFSI (banking, financial services and insurance), retail, pharmaceutical, utilities, manufacturing and hi-tech sector. We are pursuing 20 large deals (multi-year and with at least $50 million revenues each) at any given point of time. We also see opportunity in India, Asia and Latin America.

What is your view about the Indian market?
India is an important market, from which we derive about 10 per cent of our overall revenues. This is unlikely to change substantially as it takes much longer to close deals. And, while it is growing market, it is not big enough to grow our revenues in the overall global pie.  

What kind of pricing are you looking at while signing contracts?
We saw a pricing uptick in the last quarter and during the 2011-12 financial year. There will be a further uptick in pricing because the demand is there. But I cannot say whether it is in the first or second quarter or two per cent or four per cent. It is very difficult to say.  

How is the discretionary spending?
This year, we have an idea on all the IT budgets. We also know the types of investments companies are making. So, the discretionary spend will be better for us than last year. I can’t give a number but the discretionary spend this year is expected to go back to the 2007-08 level. We are seeing lot of opportunities in analytics and mobility.  

What is the current attrition level at TCS?
TCS has had the lowest attrition in the industry and we have been operating between 12 and 14 per cent. I would like it to be below 12 per cent though. Overall, I think, the attrition at TCS is pretty manageable. I don’t have a view on what will happen in the next financial year, but we can manage attrition at that level and our efforts are on to bring it down.  

About your new training centre in Hyderabad, will it work at a regional level? What are your overall hiring plans?
We currently employ 15,000 professional in Hyderabad and the new centre will train about 8,000 students. We have a big training centre at Trivandrum in Kerala and will build a larger centre there in the next three to four years. We have distributed training across five locations and Hyderabad is one of them.

As for the hiring, we hired 50,000 people during the first nine months of the current financial year. We have already made 37,000 campus offers. Obviously, we will add a lot of laterals and we will give the projections as part of our earnings call.