Softness in retail may be a one-quarter issue: TCS CEO Rajesh Gopinathan

Tata Consultancy Services (TCS), India's largest IT services company by revenue, on July 8 reported a 10.8 percent year-on-year (YoY) jump in net profit at Rs 8,131 crore for the first quarter ended June 2019.

CNBC-TV18 spoke to Rajesh Gopinathan, Managing Director & CEO; NG Subramaniam, COO; V Ramakrishnan, CFO and Milind Lakkad, EVP Global Head-HR of TCS about the results.

Talking about the softness in growth, Gopinathan said: "BFSI, we had already spoken about, some emerging softness that we saw in the capital markets part of it and the European banks that has turned out to be more than we expected at the beginning of the quarter. Then there are some individual ones like retail is more of this quarter impact but the company has hopes that it will come back up by next quarter itself."

Also read: What should investors do with TCS post Q1 results: buy, sell or hold?

When asked if the macros were a little more uncertain than a couple of months ago, Gopinathan said: "We are focused on near-term and long-term and what is encouraging is that many of the strategies that we put in place for getting back double-digit revenue growth. Focus on digital, investments in front-end capabilities on the experience part of it, analytics, automation all of these are resonating strongly with customers.

"I am happy that revenue strategy, which took us back to double-digit growth, continues to be extremely relevant to our customers. The short-term impact of what happens in the market is beyond us to predict," he added.

Talking about the BFSI vertical, Subramaniam said: "The capital markets and the European banks which we called out got accentuated in the quarter and that’s something that is reflected in our performance in the BFSI sector."

"However, if I focus on each of the customers and what they are looking at to deliver, the kind of deal wins that we have had and where is it that they would like us to focus. Absolutely, there is no concern that I have per se beyond the capital markets and things that we pointed out," he added.

When asked what it would take for the company to get back to the aspirational 26-28 percent margin band, Ramakrishnan said, “Of course currency will be a factor because rupee depreciation is part of our model. In recent few months we have seen significant currency appreciation, so that will be a definite factor. We have always maintained that temporary blips and currencies can be baked into the model but if there is a significant sustained appreciation that will have an impact.”

"However, it is important to see what other things we can continue to do and so we have been focused on significantly building a lot of capabilities both in technology as well as domain and also in terms of building our own intellectual property, assets in terms of products and platforms and that continues," said Ramakrishnan.

With regards to hiring, Lakkad said, "It was a good thing that they could hire people quicker, faster – getting them on board, training them on time and then deploying them quickly because we are seeing demand and we will not be constrained by supply going forward."

On full-year hiring trajectory, Lakkad said, "We offered 30,000 campus offers. Every quarter we look at the demand and based on that we hire people from market."

"At about 40 percent of that 30,000 are already on-board and the rest we expect to join between Q2 and Q3," Ramakrishnan added.

Source: CNBC-TV18