TCS expects first two quarters to mirror 2008-09 recession, Q3 to usher in recovery

The peak impact of coronavirus pandemic will reflect in the financials for the first two quarters of this financial year, said Rajesh Gopinathan, managing director and chief executive officer of Tata Consultancy Services (TCS). "The impact of what is unfolding around us will be comparable to global financial crisis in 2008-09," he said, while announcing the last financial year performance.

"Assuming that the Q1 will be the peak of the crisis, we expect that the we will be able to recover to the Q3 2020 level in Q3 2021," said Gopinathan. The country's largest software exporter reported a 2.8 per cent rise in net profit at Rs 32,340 crore 2019-20, thanks to double-digit growth in life sciences and healthcare business. The revenue rose by 7.1 per cent to Rs 1.57 lakh crore.

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"The Europe outperformance was a surprise, while the US business continued to be weak. Life sciences has outperformed and communications and media has been resilient," said Gopinathan. The number of over $100 million revenue generating customers increased by 5 per cent to 49.

TCS crossed $22 billion revenue milestone. The cash from operation is healthy at Rs 35,391 crore because of the conversion of strong dollar to rupee, said Gopinathan. "We have applied for 5,200 patents and 1,300 patents have been granted so far. We have got 400 patents in 2019-20. The attrition is stable at 12.1 per cent," he added. The capital allocation policy of TCS will not be changed and it will continue to return 80-100 per cent of its free cash flow to the shareholders.

About the recruitments, promotions and increments, Gopinathan said TCS has a long term approach to the talent both at the aggregate and individual levels. "Every offer that we made last year will be honoured. We don't see any retrenchment due to the demand side event, which we are sure will accelerate in the coming weeks and months," he added.

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Milind Lakkad, chief human resources officer (CHRO), TCS, said, "We will honour all the 40,000 offers made to the campus. Most of them will be finishing the course in June-July, and the onboarding will be completed by December." He also said that there will not be any increments this time, but the promotions will continue. The quantum of the promotions will depend on the business performance, he added.

The impact is broad based this time, Gopinathan said. Some of the industries at the forefront have got hit. The impact is rapidly cascading to all verticals with the ongoing economic lockdown, he added. "We are in the midst of a storm. No doubt about it. More importantly, the storm is going to be a lot worse before it gets better. We are confident that we have a good ship and a crew," Gopinathan explained.

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