Starting next quarter, TCS expects positive revenue growth q-o-q: Rajesh Gopinathan
'We are not predicting what the future is. We are sharing the trajectory that we see.'
By Nikunj Dalmia
We are switching from zero lateral hiring to selective hiring across markets says the CEO & MD, TCS.
Historically, we always pay disproportionate time and attention to the quarter gone by and we pay very little importance to qualitative guidance. I want to pick up a comment which was there in your press release. You have said that the Covid downturn is behind us and you are confident of a reasonable recovery in the second half of this year. That is a powerful comment coming from someone who is managing a company of the size of TCS. What is your definition of recovery -- is it price, is it revenue, is it margins?
What we had called out in the beginning of this quarter or the end of last quarter was that this quarter will be the peak impact of the Covid crisis and this is pretty much along the same trajectory. So when we are talking about the path to recovery, the first step is a path towards positive revenue growth from the bottom that we currently have.
We believe that starting from next quarter on a quarter on quarter basis, we should start to see positive revenue growth and slowly trace our way back to where we left out. Currently, we are expecting that in rupee terms, by the third quarter we should get to the same level as we were at the end of last year in December of last year. The trajectory on a constant currency basis also gets to flat year on year by Q4. That is a trajectory that we think is possible overall and it is coming from the nature of conversations that we are having with customers.
The last three months have been amazing from a TCS perspective and the way our associates reacted, the entire organisation came together very rapidly, completely retooled itself into a totally new operating environment. The speed at which it has done is remarkable.
But a similar story is playing out across many organisations globally. Many of our customers have taken the blow. Some of them are critically injured but other than those, everybody else is recalibrating and leaning forward. We are strong partners in that journey and we feel that that is the path which will allow us to start on this recovery that we are talking about.
When we met last in July, you said this is not a crisis like 2008. In fact, Indian IT companies like TCS are in a much better model. I am sure markets will respond to the guidance that you have shared. But the situation is not normal, We know that the number of cases are rising. What gives you confidence to call out a recovery because TCS is a conservative management? If the world is not normal, why do you think things will improve?
It is a very important question and this has come up multiple times during last quarter also. So, we have to be careful about what we are saying. We are not predicting what the future is. We are sharing with you the trajectory that we see, based on the conversations that we are having with our customers. As I said, we believe the optimism is justified in terms of the upturn in revenue growth that we expect starting from Q2. That does not in any way preclude the unimaginable things that are currently unravelling all around us.
You need to take everything in perspective. We believe that we are sharing an important data point that is of value to all our stakeholders. We do not have anything incremental to add to the environmental data points that are coming in. I am not saying that if the pandemic were to continue to unfold the way it is or if it were to further spurt, it will not have any impact on what we are saying. This is just a point of time. The data point from our side that can help each of our stakeholders make their own independent informed judgements.
I believe that this is important in such situations because in normal times, there are enough data points and enough analysts and the normal ups and downs of business. Different risk-taking appetites will make their own judgements based on that. Right now, in an extremely volatile environment we have a responsibility to all our stakeholders to transparently share what we are seeing. So that is the perspective with which we are sharing what we are saying and more importantly, this is the same perspective with which we are structuring ourselves as an organisation.
Based on the expected recovery that we are seeing, we are switching from zero lateral hiring to selective hiring across markets. So we are ourselves changing our stance and we are sharing that transparently with all of you.
We are switching from zero lateral hiring to selective hiring across markets says the CEO & MD, TCS.
Historically, we always pay disproportionate time and attention to the quarter gone by and we pay very little importance to qualitative guidance. I want to pick up a comment which was there in your press release. You have said that the Covid downturn is behind us and you are confident of a reasonable recovery in the second half of this year. That is a powerful comment coming from someone who is managing a company of the size of TCS. What is your definition of recovery -- is it price, is it revenue, is it margins?
What we had called out in the beginning of this quarter or the end of last quarter was that this quarter will be the peak impact of the Covid crisis and this is pretty much along the same trajectory. So when we are talking about the path to recovery, the first step is a path towards positive revenue growth from the bottom that we currently have.
We believe that starting from next quarter on a quarter on quarter basis, we should start to see positive revenue growth and slowly trace our way back to where we left out. Currently, we are expecting that in rupee terms, by the third quarter we should get to the same level as we were at the end of last year in December of last year. The trajectory on a constant currency basis also gets to flat year on year by Q4. That is a trajectory that we think is possible overall and it is coming from the nature of conversations that we are having with customers.
The last three months have been amazing from a TCS perspective and the way our associates reacted, the entire organisation came together very rapidly, completely retooled itself into a totally new operating environment. The speed at which it has done is remarkable.
But a similar story is playing out across many organisations globally. Many of our customers have taken the blow. Some of them are critically injured but other than those, everybody else is recalibrating and leaning forward. We are strong partners in that journey and we feel that that is the path which will allow us to start on this recovery that we are talking about.
When we met last in July, you said this is not a crisis like 2008. In fact, Indian IT companies like TCS are in a much better model. I am sure markets will respond to the guidance that you have shared. But the situation is not normal, We know that the number of cases are rising. What gives you confidence to call out a recovery because TCS is a conservative management? If the world is not normal, why do you think things will improve?
It is a very important question and this has come up multiple times during last quarter also. So, we have to be careful about what we are saying. We are not predicting what the future is. We are sharing with you the trajectory that we see, based on the conversations that we are having with our customers. As I said, we believe the optimism is justified in terms of the upturn in revenue growth that we expect starting from Q2. That does not in any way preclude the unimaginable things that are currently unravelling all around us.
You need to take everything in perspective. We believe that we are sharing an important data point that is of value to all our stakeholders. We do not have anything incremental to add to the environmental data points that are coming in. I am not saying that if the pandemic were to continue to unfold the way it is or if it were to further spurt, it will not have any impact on what we are saying. This is just a point of time. The data point from our side that can help each of our stakeholders make their own independent informed judgements.
I believe that this is important in such situations because in normal times, there are enough data points and enough analysts and the normal ups and downs of business. Different risk-taking appetites will make their own judgements based on that. Right now, in an extremely volatile environment we have a responsibility to all our stakeholders to transparently share what we are seeing. So that is the perspective with which we are sharing what we are saying and more importantly, this is the same perspective with which we are structuring ourselves as an organisation.
Based on the expected recovery that we are seeing, we are switching from zero lateral hiring to selective hiring across markets. So we are ourselves changing our stance and we are sharing that transparently with all of you.