TCS tweaking business model to tackle US visa “headwinds”
13 Jan 2017 10:05 PM GMT
Pointing to “headwinds” in the US like limited number of H1-B visas being issued and higher visa fees, IT major Tata Consultancy Services (TCS) on Thursday said it is proactively addressing these concerns by making changes to its business model.
“From headwind point of view, I think there will be some visa regulatory changes. There are two possibilities, especially when you look at the US visa. One with regard to the visa fee...The second is a commentary on the number of visas one will get. I think we are addressing both very proactively,” TCS MD and Chief Executive N Chandrasekaran told reporters here. He said more than a year ago, the Mumbai-based IT firm had decided that it will have to operate in a “visa constrained regime” in the future.
Its US visa applications narrowed to 4,000 in 2016 as against 14,000 in the previous year and only a third of them were granted last year, he said.
Already facing a slowdown in growth, the Indian IT sector is concerned the incoming Donald Trump administration under may take steps, including tightening of visa norms.
These would impact margins of the Indian IT companies that get almost 60 per cent of their revenues from the US market.
The TCS chief said US presents a “mixed bag” with a rise in GDP which can benefit companies like his but protectionist tendencies may dent it.
“You’ve to take the positive as it comes and face the negatives. It has become a norm, a normal course of doing business to calibrate and operate on a day-to-day basis.”
Chandrasekaran pointed out to a comment by Trump on focusing on local manufacturing, which he said, represents an opportunity for software companies. Elaborating on the strategies which the company is deploying in the face of the headwinds, he said the business model is being tweaked.
“We have been able to successfully execute by making changes to our business model. So we believe we are preparing ourselves well to handle the headwind, should it arise.”
He explained the company has taken steps to ensure that it has the right mix of resources (expats deputed to the US, locals and sub-contractors) and also leverages its near- shore and global centres to execute projects.
Chandrasekaran exuded confidence the company will be able to maintain its pre-tax margins guidance of 26-28 per cent despite any eventuality and pointed out to its ability to be resilient over the last year amid a sharp reduction in visas as a measure of its success.
TCS names Rajesh Gopinathan as MD and CEO
Country’s largest IT services firm TCS on Thursday named Rajesh Gopinathan as its new MD and CEO, after N Chandrasekaran elevated as Chairman of Tata Sons. TCS also appointed N Ganapathy Subramaniam as President and Chief Operating Officer. “Mr Gopinathan takes over from Mr N Chandrasekaran who has been appointed as the Chairman of Tata Sons Ltd, effective February 21, 2017,” TCS said in a statement.
TCS Q3 net profit up 11% to Rs 6,778 cr
India’s biggest software services firm TCS on Thursday reported 10.9 per cent jump in profit to Rs 6,778 crore for the third quarter of the current fiscal.
It had reported net profit of Rs 6,110 crore in the October-December period of last fiscal. The operating profit was at Rs 7,733 crore in the reported quarter.
Revenue of Tata Consultancy Services was up 8.7 per cent at Rs 29,735 crore in the third quarter of 2016-17, from Rs 27,364 crore in the year-ago period. On quarter-on-quarter basis, net profit was up 2.9 per cent, while revenue grew 1.5 per cent in the said quarter.
“The resilience of our business model and strength of our operating strategy has been brought to the fore by our performance in Q3, traditionally a quarter of weak demand,” TCS MD and Chief Executive N Chandrasekaran said.
“Our strengths in Digital, Platforms and Cloud as well as our deep knowledge of the customers’ domain are driving our ability to play a strategic role and make a holistic impact on the business,” he said.
To support and sustain the company’s digital business that is growing at 30 per cent on an annual basis, TCS continues to build new capabilities in digital technologies, empower employees to enhance agility in the workplace and invest more to develop IP-based platforms and products, he added.
“Alongside a good growth performance, we have been able to keep profitability stable in our desired range and deliver over USD 1 billion in free cash flow during the quarter,” TCS Chief Financial Officer Rajesh Gopinathan said.
The company declared a dividend of Rs 6.5 per share and its earnings per share (EPS) stood at Rs 34.40. .
TCS said employee addition during the quarter stood at 18,362 (gross) and 6,978 (net), taking the overall count to 3,78,497 people.
“Our efforts and investments to build professionals with the right digital skills continues and now more than 1.9 lakh TCSers are equipped with new capabilities to help our customers with their transformations. We are also happy that our retention rates continue to rise as we remain engaged with our employees to help them succeed in a digital world,” TCS Executive Vice President and Global Head (HR) Ajoy Mukherjee said.
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