Mumbai: The wages of Tata Consultancy Services employees would rise to 12-15 per cent in April-June, the fiscal first quarter, but the rise in the wage bill, including new recruits, would be closer to 15 per cent, Chief Financial Officer S Mahalingam has said.
Mahalingam said that the company had the ability to neutralise the impact of higher wages through measures like cost-cutting, containing the wage bill relative to growing revenue, and at times replacing experienced workers with younger recruits.
"Fundamentally the business operates on sound principles. There is an appreciation of rupee, which will definitely have an impact, which the market has priced," Mahalingam said.
He said that the company's margins were usually the lowest in the fiscal first quarter, when salaries were reviewed. “The company was also cutting costs to ease the impact on margins by balancing the need to cut travel costs with the need to visit potential clients to boost business,” he added.
India’s largest software export firm TCS sees strong demand for software services but it is not likely to sustain last year's 41 per cent revenue growth in part because of the rising rupee. TCS shares, which have fallen nearly 10 per cent in the last three months, closed 0.4 per cent lower at Rs 1,140 , the lowest finish this year.
Mahalingam said, “The operating margins of TCS would shrink by 2 percentage points in the current quarter compared to the January-March period due to the wage bill. Rupee appreciation was likely to have a similar impact.”
The rupee has risen about 8.5 per cent against the dollar this year, to be Asia's best performing currency. It closed at 40.77/ 78 per dollar.
"In the short term, maybe because we have so much money coming in, the rupee may go to 39 or so, but we will gain from hedging," Chief Financial Officer S Mahalingam told the media.
“India's largest software services exporter was not likely to repeat last fiscal year's revenue growth of 41 per cent,” he said. Revenue in the period was Rs 186.85 billion ($4.6 bn).
"The demand environment is good but certainly on a bigger base we can't repeat those high percentages," he said. Mahalingam added that he expected pressure from the appreciating rupee to ease over time.
India's low-cost, English-speaking workforce has attracted foreign firms like IBM, the world's largest technology services company, and helped local rivals including Infosys Technologies and Wipro to grow.
Mahalingam said, “India remained an attractive place for software firms despite rising wage costs and the appreciating currency. "You can still develop a lot of intellectual property in India and be able to command much better prices. So pricing becomes a driver," he said in an interview at his office overlooking the Arabian Sea.
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