Mumbai : The country’s largest IT services company TCS will continue to invest in research and innovation, office space and technology infrastructure at the same pace even as it goes through near-term volatility, a senior official has said.
Sameer Seksaria, the company’s chief financial officer, said that the company’s promise to continue with normal salary hikes will lead to a further decline in operating profit margin of 1.70-1.75% in the June quarter.
He said the company usually spends 1,200-1,500 crore in research and innovation and 3,000-4,000 crore as capital expenditure on back-end technology required to deliver work and office space, and this should continue.
“…we continue to invest, we continue to invest in talent, we continue to invest in research, in innovation, in branding and in IT. And we don’t see any reason to differ Should be.” What we have always done,” Seksaria told PTI.
The company reported setbacks to its business due to technology layoffs in its largest market North America and its largest industry vertical banking, financial services and insurance (BFSI) and deteriorating sentiment due to the implosion of Silicon Valley Bank.
It posted a 0.6% increase in constant currency on a sequential basis, which Seksaria described as unusual for a fourth quarter.
Describing the overall 13.7% growth in revenue in FY2012 as a good growth from over 15% growth in FY2012, Seksaria said that the company expects things to pick up with the start of the new year. Better yet, and didn’t expect massive layoffs—the holidays, and the collapse of SVB only exacerbated things.
Seksaria declined to share the company’s outlook on future revenue growth or profit margins, saying it intends to exit by FY24, adding that the focus right now is to be closer to the customer , is to understand their needs and work on it.
Seksaria said the company plans to continue with its usual pay revision even as it faces ups and downs, adding that the best performers can expect a hike of up to 15 per cent this year as well .
Seksaria said, “Historically, the impact of our wage growth has been between 1.50-2 per cent, averaging somewhere around 1.70-1.75 per cent. This should be something we can expect.”
The pricing environment is “stable”, he indicated, adding that it has not been affected due to the ongoing troubles in the IT sector. Customers want low-cost organization and simplified processes, which help them save costs, for which they keep flocking to IT companies, he said, pointing to USD 10 billion of new orders registered in the March quarter, including Half were from North America.
Asked about the impact of work differences on total contract value conversion in revenue bookings, Seksaria said the company tracks the numbers but declined to share them.
On the 26-28% operating profit margin band aspiration, he said there is no reason why the business model should not be able to deliver that number as things return to normal, but insisted that the number should be 24.5% in Q4FY23. % comes on “significant”.
He added that the investment, which is very small compared to the total revenue of the company, which the company plans to continue with, will not impact the profit margin as the margin figure is factored in by the expenses.
Seksaria said the company plans to continue aiming for higher utilization and reducing reliance on outsourced employees, as it pursues the aspiration of profit margin expansion. And it will go back to the historical average of 7-7.5%.
Seksaria also said the company expects a higher revenue booking trend from Europe and the UK, which collectively account for nearly a third of its revenue, as North America faces a chill due to near-term volatility. .
He added that customers in the UK and Europe have internalized the macro situation and that the Russia-Ukraine war is going on for a long time, due to which they have started re-engaging with IT companies.
catch all corporate news And updates on Live Mint. download mint news app to receive daily market update & Live business News,