Growth acceleration will continue in Q4, says TCS

Tata Consultancy Services' (TCS) growth acceleration will continue in fourth quarter as well, said Rajesh Gopinathan, managing director and CEO of the company, adding that the firm is set well for financial year 2020.

"The trajectory is good and I think that acceleration will continue in Q4 also and that will set us up nicely into FY20 because the exit rate on that will be very good going into FY20," he said.

TCS on January 10 posted 24 percent year-on-year (YoY) rise in profit at Rs 8,105 crore for the third quarter. The numbers came mixed as the dollar revenue and constant currency growth largely met estimates, but margins were a miss due to cross currency headwinds and higher cost of doing business.

Also read - TCS Q3 review: Earnings in line, but supply constraint a factor to watch out for; buy on dips

The management, in an interview with CNBC-TV18, elaborated on the numbers and the outlook going forward.

On the business front, Gopinathan said, "Our entry into 2019 compared to 2018- we are going in with a very strong orderbook and this orderbook is very broad based. So we went into 2018 with a strong orderbook but it was concentrated in a few mega deals and couple of sectors whereas here we are going in a very broad based orderbook of almost equal size and an accelerating orderbook."

"The deal pipeline that we see and we have shared is continuing to be strong. So we do read the same headlines on the macros but we are backing the demand that we see and we are backing that with our strong hiring," he added.

Speaking about the cost of doing business, V Ramakrishnan, CFO of the company, said, "For the simple reason that we have been engaged in the US on multiple fronts in terms of hiring from the campuses ... this has all been part of the strategy. So some of these things on a medium-term to short-term, there could be some blips but structurally we don’t believe that this is altering any cost structure on a long-term basis. So we stay very focused on the overall revenue growth plus with the strong margin performance."

Talking about hiring plan and compensation, Ajoyendra Mukherjee, EVP and head-global HR, said, “The number of hiring that we do depends primarily on the business demand that we see.” “As far as compensation is concerned, the increment etc. that will happen, that is usual because each year there is an expectation and there is a cost of inflation and our compensation model has various variables. So based on that there will be an increment."

While explaining whether the clients are facing any stress on the retail side, Pratik Pal, EVP and global head - retail, travel, transportation, hospitality and CPG industry unit, said, "The retail industry is the most disrupted but we should also know that technology spending happens the most when there is disruption. So what is happening is because the disruption is happening, retailers cannot sit quietly and do nothing. So they are spending heavily on technology. Why the spending is growing? The spending is growing to get the online/offline right and many retailers have done that but we firmly believe that the retailers are going to spend more on getting that entire online/offline – we call it the omnichannel – rights. So yes, it is stressed but then they will have to spend and the technology spending we are seeing is significantly high."

Speaking about digital spending,  N Ganapathy Subramaniam, COO, said, "Bulk of the discretionary spend really happens on the digital front, no doubt about it..."