TCS is hopeful of a 'V-shaped' recovery once Covid-19 is contained: COO

IT bellwether Tata Consultancy Services (TCS) is hopeful of a ‘V-shaped’ recovery once Covid-19 is contained. Though the Tata group company is expecting to face headwinds in the quarters of June (Q1) and September (Q2) of 2020-21 financial year, it is hopeful of coming back to growth path in the December quarter (Q3). N GANAPATHY SUBRAMANIAM, chief operating officer, tells Debasis Mohapatra & Sai Ishwar the company will also participate in merger and acquisition (M&A) opportunities. Edited excerpts:

How is TCS dealing with the Covid-19 crisis? How do you plan to operate with 50 per cent of employees in office?

We started dealing with the situation back in December, when it began in China. We moved very quickly in China, with none of our employees being affected. For the current situation, we have formed a committee that meets every day and coordinates operations globally. More than 90 per cent of our staffers are working from home (WFH). The government has allowed IT/ITeS companies operate with 50 per cent staffers, but we are going to do it in a staggered manner. We are not in a hurry to get employees back to offices. As long as work gets done, there is no need to do it immediately. Also, we have to prepare different scenarios taking into account various possibilities.

How did Covid-19 crisis impact TCS’ operations in March? How severe will it be in Q1?

In March, two-thirds of the impact was related to supply side, as employees had to work from home and approvals had to be obtained from IT clients for doing the same. However, 80 per cent of the impact in Q1 will come from demand side. But, overall, we feel that we have managed it pretty well. We are delivering more than 26,000 projects without any disruption.

There are talks that clients globally have started asking for discounts, lesser support and, in some cases, even requesting for delay in payments… We are hearing a bit of everything that you mention. But not all of them ask for everything. Some people ask how you can help in a situation when their business is under stress. Some have asked for discount in prices. Some have requested to halt projects for now. So, there are all kinds of discussions that are happening. We have also seen situations where some clients are asking to accelerate the project and finish it ahead of time. We have also got some additional works from clients, which their other vendors were not able to handle. So, it's a mixed bag. Some clients are also asking help in moving their operations to WFH (mode), after seeing that we have done it successfully.

So, TCS has not seen any project cancellations?

We have not seen any project cancellations. In some pockets, there are suspension of projects, but there have not been cancellations altogether.

When the management says TCS will come back to previous growth rates in Q3, does it mean you are not expecting any revenue contraction in FY21?

It is difficult to predict. When we look at the 2008 global financial crisis, the banking industry was fundamentally affected, which impacted other industries. In the current situation, economic activity has halted because of the lockdown. When the pandemic is contained and economic activity resumes, all sectors will rebound simultaneously. That is how we are seeing the situation.

In Q3 of FY20, our revenue stood at Rs 39,000 crore and what we are hoping is to touch the same level in Q3 of FY21. Given the deal pipeline and demand scenario, we feel optimistic. When we model our experience from global financial crisis, the recovery will be swift for every industry once the pandemic is over. So, it looks like a 'V-shaped' recovery at this point in time.

What are the cost optimisation measures TCS is planning to take?

There are many levers. How we execute a project within the budget and time is the biggest lever we have.

We have also decided not to take any salary increase this year. By adopting the remote way of work, naturally travel costs have come down significantly. After wage, travel expenses are the second biggest cost item for the company. Even with travel restrictions, marketing cost will come down with more digital marketing. Third cost item is utilities and the fourth one is ‘contracting’ cost. The focus will be on growth.

Will you look at more M&A opportunities as such crisis normally leads to consolidation?

Definitely, we will look at these opportunities. TCS had its biggest acquisition (captive BPO of Citigroup) during the global financial crisis (in 2008). So, these are good times to buy.