Tata Consultancy Services (TCS) does not see any major threat posed by the Greek and Chinese crisis as the tech major has lesser exposure to these markets. In an interview with Rhik Kundu, Tata Consultancy Services’ CFO Rajesh Gopinathan says there could be a secondary impact with countries Australia, where the company has a fairly large exposure. Excerpts:
How are Greece and China going to affect TCS?
We are not directly exposed to these geographies. The secondary level exposure is unlikely to affect the pricing side, but could impact demand. You could have a secondary impact on the Australian market, which is a fairly large market for us.
Our operations in China are less than $100 million and negligible in Greece. But if Greece’s trouble with eur zone worsens, it could have a knock-on effect on us.
Your dollar revenues grew only 3.5%, sequentially, the lowest in last few quarters. Is this a cause of concern?
It is not a cause of concern. I would be concerned if we were losing market share or growth was happening in areas we were not participating in and if the market was shifting away from us. It is less than the previous quarter, but we wouldn’t say that 3.5% is the new normal. We continue to remain competitive and hope that growth will improve over time.
Latin America and Japan saw slower growth in the quarter. What is your medium- to long-term view on these geographies?
Japan had two good quarters of growth and then it had de-growth. Latin America went through phases of growth and de-growth over the last couple of quarters. These are volatile markets so you shouldn’t compare uptick or down tick on a sequential basis. We are very small in these markets.
We will, however, look to expand in Japan, where the market is huge and tightly held by few incumbents. On the demand side, Latin America is characterised by a few large corporates like Telefonica and Santander. From the market perspective, their large companies need to be served by companies like us. But the market there is primarily dominated by local suppliers than global suppliers. We believe, going forward, there should be a strong traction.
Your insurance platform Diligenta has been lagging. When do you expect it to pick up?
Diligenta is currently in a situation where most of its existing deals are in support stage. It awaits new deals.
However, there are many deals in pipeline which needs to fructify. Diligenta’s revenue profile will change based on this. We expect to close many deals in this vertical (insurance) in this fiscal and some next year. We are likely to see some kind of stress in Diligenta over the next couple of quarters.
Can you shed light on the pricing scenario given the global macro-economic situation?
Pricing scenario is always stressed. Most customers are under pressure and they pass this on us. Even during good times, pressure continues to exist. On a like-to-like basis, we don’t see any structural breakdown of big price meltdown. However, the pressure is expected to exist.
What is the nature of deals are happening currently? What are clients seeking from you?
In markets like the US, companies are pursuing new technologies. But, in Europe, customers still have the traditional approach — on old-fashioned outsourcing and cost effectiveness. Asia-Pacific, however, is a mixed lot.