Revenue slowdown due to drop in India business: Chandrasekaran
Tata Consultancy Services shares fell as much as 6 per cent on Friday after the company missed consensus dollar revenue forecast for the first time in two years. TCS, India's largest outsourcer, had announced its third quarter results after markets closed yesterday. CEO and managing director N Chandrasekaran blamed a decline in the company's India business for the miss in revenue growth forecast. He sounded confident about TCS' prospect in the next fiscal. (Watch the full interview)
Here is the edited transcript of Mr Chandrasekaran's interview with NDTV.
It has been a less than perfect quarter?
We saw signs that business is slowing down in India, and we did talk about it in November. The business in India is going to be slow for next two-three quarters. India business has been very volatile but now it's going to be slow. We have taken a huge a hit as revenues have fallen 9 per cent sequentially, which is reflected in the dollar growth expectation being missed.
Has elections impacted the domestic business?
You can link it to many things, but at the end of the day we felt that it's going to be slow. So, took a pause and said let us not factor in until September next year.
Will India business remain at 6.5 per cent?
It's very difficult to say. We are growing very well internationally and see tremendous opportunities outside. Here in India there are two factors; there is delay in closing deals and the other is that we are qualifying out of some deals because the pricing is not making sense. Given both of these parameters our India business to going to be muted.
What was the reason for the weakness in the Asset leverage solutions business?
That is nature of the business because it's our own IP based implementations, so we have at any point of time number of deals going on. And when big implementations get completed, new implementations take time to pick up so you will see volatility. It's fair to accept that in Asset Leverage Solution if there is going to be big spike, next quarter will be a little slow.
Will fiscal year 2014-15 be better than 2013-14?
First of all we see a lot of momentum in every market and every industry in which we operate in fiscal 2015. Secondly, this whole digital is going to be a big opportunity. Previously, people used to look at mobility as digital but mobility now with the combination of cloud has become infinitely powerful because mobile phones and apps are operated on cloud data and social with the combination of mobility and cloud data is generating huge amount of transactions. This is getting adopted by lot of companies and lot of analytics is coming in. It is no longer one technology. It's the combination of these technologies that makes an organization powerful.
Every company we engage with wants to get into this. The number of clients, the number of projects and size of each of these is growing. It's a $4-$5 billion opportunity for TCS in next three years.
What about margins?
It is our stated intent that operating margins will be in the 26-28 per cent range and more so 27 per cent. If we wanted we could have pushed the margins but consciously we have taken a decision on re-invest into the business. When it was little over 30 per cent we thought we need to find ways to reinvest into business. That is what you have seen this quarter; we have invested almost 70 basis points. We will continue to do this. We are looking at investments and not at capturing margins and are very comfortable at 27 per cent range.
How much stronger will fiscal 2015 be?
First of all we see a lot of momentum in every market and every industry in which we operate. Secondly the discretionary spend is going to grow. Third, our ability to take on large scale transformation projects today is much better than ever before. So we will compete better, will compete in more places and therefore the total market in terms of what we will address is much larger. Given this we should do better.
