Aspire to further expand operating profit margin: TCS CEO Krithivasan

Having exited FY24 with an operating profit within its aspirational band, the country's largest IT services company TCS will be looking at expanding further on the key metric and take it "as close to" 28 per cent as possible, a top company official has said.

"We just entered that (aspirational) range. So, we would aspire to stay here or at least go up as close to 28 (per cent) as possible. We do believe that there are a little more headroom left for us to increase our (margins)," TCS Chief Executive Officer and Managing Director K Krithivasan said.

There are a slew of levers available to widen the number like fixing the pyramid, mix pushing its utilisation, and also upping deal pricing, Krithivasan told PTI in an interview.

 

Asked about pricing, which was marked out as a key to improve margins further by its Chief Financial Officer Samir Seksaria in the post-earnings call last Friday, Krithivasan said the company has not faced any troubles on it despite a series of headwinds in its key business areas.

The company has been able to hold on to deal pricing over the last year, and while it may not have improved, it has not come under any pressure, he said.

Accepting that there are competitive pressures influencing pricing, Krithivasan said he does not expect pricing to come under severe pressure because the clients also know that deal prices have been stable even as the we witnessed high inflation.

The first quarter will witness a dip in the margin level because of the wage hikes it has announced, but the number will go up during the year, he said, adding that the aspiration band continues to be in the range of 26-28 per cent.
 

On its domestic business, which helped post it a 3.5 per cent revenue growth in the fourth quarter of FY24, Krithivasan said despite the need for improvements... it does take large projects.

TCS would want to have improvements in the terms in conditions of contracts like the ones on liabilities, bank guarantees and payment terms, he said, adding that the acceptance criteria on aspects like deliverables and warranty period also needs a relook.

To a question on where he sees the contribution of revenues from India, Krithivasan said it will go up substantially, adding that TCS' revenue pie should also reflect India's economic strength at a time when the country is all set to be the third largest economy in the world.

Asked about the dent to sentiment because of headlines like the tensions in the Middle East, Krithivasan said there is an indirect impact of such events on its business, but added that there he is not worried immediately.

The company, which saw a reduction of nearly 13,000 staffers in FY24, is entering FY25 with possibilities of expanding on the base of over 6 lakh employees, Krithivasan said, adding that while it will hire 40,000 freshers, the demand for lateral hires will be decided by the way the business environment shapes up.

Attrition, which dipped to a multi-quarter low of 12.5 per cent in the January-March period, played a role in reducing the overall headcount in FY24, he said.

Krithivasan said he is satisfied with the performance of the company under his leadership in the one year, but hinted that it will continue to do tweaks in the organisation structure to respond to market dynamics.

The TCS scrip closed 1.47 per cent down at Rs 3,941.30 a piece on the BSE on Monday as against a 1.14 per cent correction in the benchmark.