is India's first IT company to cross the USD 4 billion mark in revenues. The company is chasing 10 deals of over USD 50 million each and the management is optimistic about a stronger business environment.
The company's CEO and Managing Director, S Ramadorai mentions that FY07 has been a standout year for TCS and he is extemely positive about growth going into FY08, which will be led by volume based growth, new services and margins via offshore delivery.
He says, "We are feeling very positive about the business going forward as we announced we closed 12, USD 50 million deals, which are in a ramp-up mode. Differentiated services and cross section of services, where we have seen a lot of momentum and growth is going to play out. Overall, we enter the year '07-'08 on a positive momentum with regard to ramp-ups as well as new services."
Speaking about the drivers for growth in FY08, Ramadorai says, "One is the volume led growth where ramp-ups are on the existing accounts or the new accounts. Second, newer services would come at better price and third, the margins would be addressed through more of offshore leverage and global network delivery. So it’s a combination of these three, which we believe, is going to get us the growth and the margins."
The company seems to have weathered a rising rupee and a rising wage bill. TCS hopes to use its currency management skills to beat a rising rupee. S Mahalingam, CFO, TCS says, "The rupee has been very volatile even in this quarter. Although we didn't have a situation of rupee depreciating and appreciating in the same quarter like tin the earlier quarter, but certainly, there was a sharp decline in early March and there has been an impact from a revenue point of view. In the sense, we had to book revenue at a slightly lower rate because the exchange varying on those days might have been good. But inspite of that, our currency management has been extremely good."
Mahalingam attributes three factors due to which he hopes to maintain margins rather than improving it. "One, there is a wage increase that is happening. The second one is TCS is really the true Indian multinational if you really look at whatever parameters you choose - whether it is a question of delivering from outside or a question of having large number of employees from outside, the question of senior management providing. So that is a fundamental alternation to that. The third one is, of course, the exchange factor. Therefore, I think it is better to talk about holding the margins rather than improving the margin."
N Chandrasekharan, Head-Global Operations informs that in terms of revenue growth, all verticals are growing and the environment is very encouraging. He also adds that most of the deals that TCS closed last year have been very well distributed in terms of geographies. The company has had deals from Latin America, Europe and UK.
Speaking about the deals, NG Subramaniam informs, "About three-four of them are from banking financial services and a couple of them are from insurance. The point I am trying to make here is that we are actively supporting financial institution in about 53 markets today, which gives us a very large and global perspective, which is actually big differentiator for TCS in winning those deals."
Shifting focus to the company's BPO operations, Chandrasekharan mentions that it has been deriving growth from in certain verticals like pharma, travel and insurance. He informs that they have won some outstanding deals, good client acquisition using BPO capability, where the company can cross sell their services. "These are verticals where we are using BPO as the entry strategy and the whole BPO strategy for TCS is around verticals, so its good."
On concluding lines, Ramadorai says that the company is looking at organic growth as the key driver of their strategy. Differentiated services with alliances and partnerships would be the second level of opportunity. "With regard to inorganic possibilities, we just don’t work a strategy thinking that this is what we are going to do or this is the revenue or this is the margin improvement. It has to be strategically making sense and the synergies must make sense. So that is a scan that happens on a continuous basis but no strategies on the basis of inorganic growth."
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