TCS will continue to invest in R&D, technology, office space despite ongoing volatility

The company’s pledge to continue its usual pay rise will impact operating profit margins by another 1.70% to 1.75% in the June quarter, CFO Samir Seksaria said, adding that the key metric would stabilize in the new fiscal year.

He said that the company usually spends ₹1200-1500 crores for research and innovation and ₹3000-4000 crores in capital expenditure on server technology needed to provide work and office space, and the same should continue into the future.

“…we keep investing, we keep investing in talent, we keep investing in research, innovation, branding and IT. what we have always done,” Seksaria told PTI.

The company reported setbacks to its business in its largest market in North America and the industry’s largest vertical banking, financial services and insurance (BFSI) due to a downturn in sentiment from tech layoffs and the collapse of Silicon Valley Bank.

That led to him reporting a consistent 0.6% gain in constant currency, which Sexaria said is unusual for a fourth quarter.

Calling overall revenue growth of 13.7% in FY23, in addition to a jump of more than 15% in FY22, decent growth, Sexaria said the company is hopeful that things will improve as the new year begins and does not expect massive layoffs. .-holidays, and the collapse of the SVB only exacerbated the situation.

Seksaria declined to share the company’s views on future revenue growth or the profit margin it aims to come out of fiscal year 24, saying the focus now is on getting closer to the customer, understanding their needs and meeting them.

The company plans to continue with its usual salary reviews, even with the volatility it is going through, Sexaria said, adding that top workers can expect up to a 15% increase this year.

“Historically, wage increases have been in the range of 1.50-2%, on average somewhere between 1.70-1.75%. This is what we can expect,” Sexaria said.

The pricing environment is “stable,” he said, hinting that it has not been affected by current problems in the IT sector. Customers want smarter organizations and simpler processes that help them cut the costs they keep turning to tech companies for, he said, pointing to $10 billion in new orders registered in the March quarter, half of which were from North America. America.

Asked about the impact of work delays on the conversion of total contract value to booking revenue, Sexaria said the company is tracking the figure but declined to disclose it.

Regarding aiming for an operating profit range of 26-28%, he said there is no reason why the business model can’t meet that target when normalizing, but stressed that achieving 24.5% in Q4 FY 2023 was “significant”. .

He said that the investment, which is very small compared to the company’s overall earnings, which it plans to continue, will not affect the profit margin, since the margin figure is obtained after expenses are taken into account.

The company plans to continue aiming for higher utilization and less reliance on outsourced workers as it pursues a drive to increase profits, Sexaria said, adding that spending on business partners has already fallen to more than 8% of revenue in March. quarter, and will return to the historical average of 7-7.5%.

Sexaria also said the company expects the upward trend in revenue from Europe and the UK, which together account for almost a third of its revenue, to continue as North America faces a chill due to short-term volatility.

He said that clients in the UK and Europe had internalized the macroeconomic situation, and the war between Russia and Ukraine had dragged on, causing them to re-engage with tech companies.