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16-04-2024
Bureau Report + Agencies
NEW DELHI/ BENGALURU: Commanding higher pricing for technology contracts will be one of the ways Tata Consultancy Services (TCS.NS), opens new tab looks to “further enhance” its operating margin that is already at a 12-quarter high, its chief financial officer said on Saturday.
“One way to increase is the revenue profile across products which you are selling. The high-end products mix goes up. Second is when deals come up for renewal, you structurally push for inflation-linked adjustment,” CFO Samir Seksaria said.
During its fourth quarter results on Friday, the company reported a 150 basis point increase in its operating margin from a year earlier to 26% on account of “disciplined execution” and lower subcontractor costs.
There are mainly two types of pricing models for contracts with IT firms, the client is charged for the number of hours an employee is deployed on a particular project or pricing is linked to the milestones or outcomes achieved in a specific project.
Seksaria also said any price increases would be “structural” in nature and will be used as a medium- to long-term strategy. “You can’t go to a customer and say, I’m increasing my prices from tomorrow,” he added.
However, India’s largest software services firm expects a 150-200 basis point decrease in its operating margin during the year as it announced annual salary increases effective in April, Seksaria said.
But an influx of new hires at the lower end of the organization and higher productivity should be supportive for margins, he said.
On Friday during its earnings conference, TCS said it plans to hire around 40,000 fresh college graduates in the ongoing fiscal year, similar to what it did in the preceding year.
The company also reported lower-than-expected quarterly revenue on weak client spending in North America.
However, the company said it is expecting a “better” fiscal 2025 on a robust deal pipeline including a record $13.2 billion worth of orders in the reporting quarter.
Tata Consultancy Services (TCS.NS), opens new tab said on Friday it is banking on its robust deal pipeline to drive growth in 2025 after it reported lower-than-expected quarterly revenue on weak client spending in North America.
The $254-billion Indian IT sector’s clients have been curtailing their discretionary spends amid inflationary pressures and recession fears in key markets such as the United States and Europe. Industry body Nasscom estimated overall revenue growth more than halved to 3.8% last financial year.
For fiscal year 2024, the software maker’s revenue growth fell to 3.4% after adjusting for currency fluctuations, compared with 13.7% growth in the previous fiscal year.
Tata Consultancy Services Limited (TCS) is an India-based company engaged in providing information technology (IT) services, consulting, and business solutions. It operates through Banking; Capital Markets; Consumer Goods and Distribution; Communications, Media, and Information Services; Education; Energy, Resources, and Utilities; Healthcare; High Tech; Insurance; Life Sciences; Manufacturing; Public Services; Retail; Travel and Logistics. The Company’s products include TCS ADD, TCS BaNCS, TCS BFSI Platforms, TCS CHROMA, TCS Customer Intelligence & Insights, TCS ERP on Cloud, TCS Intelligent Urban Exchange, Quartz-The Smart Ledgers, Jile, TCS Optumera, TCS TwinX, TCS TAP and TCS OmniStore. Its services portfolio consists of Cloud, Cognitive Business Operations, Consulting, Cybersecurity, Data and Analytics, Enterprise Solutions, IoT and Digital Engineering, Sustainability Services, TCS Interactive, TCS and AWS Cloud, TCS Enterprise Cloud, TCS and Google Cloud, TCS and Microsoft Cloud.
