TCS will not look at protecting profit margins; to continue investments as per biz requirements, says CFO

PTIUpdated: Monday, October 11, 2021, 03:27 PM IST
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TCS continues to be focused on the 26-28 percent operating profit margin band and has its structures aligned towards achieving the aspirational band, its chief financial officer Samir Seksaria underlined./ Representational image |

Tata Consultancy Services will continue to invest as per business requirements and not look at protecting profit margins, a senior official has said.

The company, however, continues to be focused on the 26-28 per cent operating profit margin band and has its structures aligned towards achieving the aspirational band, its chief financial officer Samir Seksaria underlined.

"(as we see) short-term volatilities, it is not that we will do things only to protect the margins. Whatever the investments are required, whatever is the right thing to do we will continue to invest. In the short term, we are not looking at… the short-term focus will be to feed the needs of the business as far as possible," Seksaria told PTI.

In the September quarter, the largest software exporter reported margins at 25.6 per cent and stated the possibility of short-term volatilities on this front like supply-side constraints as the attrition goes up, currency headwinds and the possibility of demand getting impacted due to future waves of pandemic.

The company, which employs over 5 lakh people, also reported an increase in attrition at 11.9 per cent.

"Currently, the short-term volatility is in terms of supply-side challenges mainly due to elevated attritions," Seksaria said, adding that in the quarter gone by, it also faced headwinds from currency," he said.

TCS has been able to manage better than peers on the supply side or human resources front because of its upfront investments even when demand had shown difficulties in the initial days of the pandemic, he added.

The same is seen in the 75,000 new hires done in the last one year, or over 43,000 hires in the first half of the ongoing FY22, he said.

The CFO said the company learnt from its experience of the global financial crisis of 2008, and expected demand to recover in a V-shape.

However, despite strong hiring, it was able to get employee costs down by 0.20 per cent to 56.3 per cent as it shifted tactics to hire more low-cost freshers, he said, making it clear that the company will continue to balance between freshers and laterals going forward.

"Our investments going forward are more in terms of competency building, strengthening research and innovation and intellectual property," he said.

Seksaria said the company had realigned investments between the three as per business demands and the overall investments were at the same levels.

He said there has not been any material impact on the costs because of the pandemic, even though there have been a few changes in some items.

From a deal flow perspective, the company continues to be positive, adding that the new deal signing has always ranged between USD 7-9 billion.

The company has invested Rs 1,250 crore in the first half of the fiscal for physical infrastructure and will continue with similar activities, he said, adding that in FY21 it had invested Rs 3,000 crore

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