TCS a story of freshers, long tenures, says CEO & MD Rajesh Gopinathan | India Business News

BENGALURU: A day after TCS reported solid double-digit revenue growth in constant currency, CEO & MD Rajesh Gopinathan spoke to TOI on why TCS and Indian IT are on a good wicket, despite concerns about a global recession.
You seem reasonably confident that the US will remain a good market for Indian IT this year, despite fears among many of an impending recession?
I believe the US economy is in good shape. The individual companies are in good shape, other than mortgages which are totally linked to the interest rate cycle. Over the last 2-3 years, they went through supply chain challenges, massive inflation, lack of availability on the chip side, and higher interest rates. The cost of capital may still go up, but all of the other issues are getting addressed. The overall cost structure is coming down. There are enough balances in the larger economy, and it’s insulated from what is happening in the rest of the world. If a recession happens, it will be more technical in nature – repricing of the cost of assets, which might have a dramatic impact from a financial markets’ standpoint, but not as much on the real economy.
What are your customers saying?
Our individual conversations with customers broadly bears out what I just said. Take retail. The overall volume of the holiday sales has been high – adjusted for inflation, the revenue is high, unit volume is high. Mid-priced items are preferred over higher priced items, but the total generated is higher than what it was last year. There is nothing to show that demand is falling off the cliff. Airlines and retailers are doing well. Banks are doing well – higher interest rate regimes are more than efficient for banks and the overall balance sheet is under control.
Why is Europe a different story from the US?
They don’t have week-on-week visibility on energy. A lot of the feedstock into European manufacturing is affected. There is a general sense of concern around the volatile geopolitical situation. There’s not much forward movement on companies and that will take time to stabilise.
We see your global rivals hiring aggressively in India. How much of the Indian IT playbook have global IT firms embraced?
Our business model has been taken as a de facto business model and everybody is embracing it in different forms and ways. Some started from a business consulting background, and they tried to emphasise that part of the value proposition, while we started from the tech side, emphasising that part of the value proposition. Both of us are now fighting for the middle ground where the bulk of the money is. Regional players have broadly lost out. The market is getting more consolidated into a few global players and smaller specialised players. For an industry with some $1 trillion in revenue, it used to be very fragmented. But consolidation is happening at the top, and the largest players now account for 30-40% of the business.
Do you see attrition stabilising amid slowdown fears?
The annualised attrition in the last quarter was down 6%. We expect it to go down significantly. In Q2 next year, we should be close to the long-term average of around 12-15%.
You said TCS would hire about 1.2 lakh people next fiscal. That’s a big number at a time when revenue is slowing.
Two years back, I started seeing demand spike and attrition on an industry scale. Our attrition remained under control for a long period before it started peaking. We knew that pressure would come and so we took a strategic call to double down on fresh hiring from campuses. In FY22, our net addition was 100,000, gross hiring was upwards of 200,000. We had never done this before. In December 2022, we are 55,000 more than in December 2021. We believe we are in the middle of a multi-year tech cycle, we have visibility into demand, and so we’ll double down on campus hiring.
You have said you will reduce dependency on lateral hires…
TCS has been a story of freshers, long tenures and high retention. As attrition slows down, lateral hiring will keep on coming down.
Do you think moderation in IT budgets would open up more cost-take out and vendor consolidation opportunities?
The nature of the deals is much more complex. When we think about cost take-out, it is a very narrow single-dimensional description of it. To be able to execute large transformation deals there is an investment required, and we have to fund it by increasing our own efficiency, by working on our talent efficiency. We will take primary responsibility in running the customer’s estate, while they will take responsibility for the transformation roadmap they are on. We are able to move in parts and we will take the cost off the table by the ability to variablise it. We are also gaining higher insights into their application estate, which will enable us to bring down the total cost further.
How do you think margins would be in this environment where demand is weakening?
The demand side is weaker, demand for talent is weaker, the cost side is more benign. The kind of attrition we had and the kind of impact it had on cost structure is not going to be there. There’s some balance emerging. Margins are a reflection of relative competitiveness, and we are doing well on that count.

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