Profitable Growth Through Financial Leadership S. Mahalingam Executive Director & Chief Financial Officer TCS Analyst Day, New York
Top Investor Concerns Sustaining Growth Lingering global economic outlook Troubled banking sector Maintaining Profitability Salary inflation Flattish pricing environment Funding investments for future growth
Sustaining Growth - Changing Profile Of TCS Business Revenue by Geography Others 6.3% India 11.9% Americas 61.1% Asia Pacific 5.2% MEA 1.7% India 9.0% North America Continental 50.7% Europe 9.2% Europe & UK 20.7% UK 19.8% Ibero America 4.4% FY02 Revenue: $0.9 bn FY08 Revenue: $5.7 bn Diversification provides protection from a slowdown
Sustaining Growth - Changing Profile of TCS Business Revenue by Service Practice Assurance 3.7% Infrastructure Services 6.5% BPO 6.2% Consulting 3.4% Asset Leveraged Solutions 3.6% EIS 5.4% Asset Leveraged Solutions 1.6% Others 0.3% Enterprise Solutions 13.1% Enterprise Solutions & BI 10.8% ADM & EIS 87.3% BI 9.7% ADM 48.3% FY02 Revenue: $0.9 bn FY08 Revenue: $5.7 bn Diversification provides protection from a slowdown
2008: A Challenging Year Headwinds Wages (316 bp) Rupee Appreciation Investments in Future Growth (415 bp) Global Structure New SEZ sites Headcount additions for FY'09 growth Platform based BPO Products Business- TCS Financial Solutions Small & Medium Business Initiative
2008: A Challenging Year Pricing 6.58% Headwinds Largely Offset Off shore Leverage 0.35% Hedge Program 1.95% 2008 21.95% Net Impact : Net Income 2007 22.17%
2008: Q4 A Challenging Quarter Revenue + 2.9% Q/Q Delay in expected project starts Margins Operating Margin: 22.8% Net Margin: 20.6% Continue to invest for future growth Headcount additions to drive FY 2009 growth Infrastructure Project transition
2009: Looking Ahead Environment Rupee: Stable Pricing: Stable with upward bias Demand Robust over full year, though sluggish near term Significant opportunities to assist clients: Transformation projects Cost rationalizations Vendor consolidations
2009: Focus On Operational Excellence To Maximize Profitability Utilization Offshore Leverage SG&A Cost Management Employee Cost Control
2009: Focus On Operational Excellence To Maximize Profitability Utilization Offshore Leverage SG&A Cost Mgmt Employee Cost Control Average utilization range: 78% - 80% FY 2009: Higher utilization rate to improve margins
2009: Focus On Operational Excellence To Maximize Profitability Utilization Offshore Leverage SG&A Cost Mgmt Employee Cost Control 50.0% 40.0% 30.0% Offshore Revenue and Impact on Operating Margins 500 bps 400 bps 300 bps 20.0% 10.0% 0.0% 100 bps (50 bps) 125 bps 35 bps 200 bps 100 bps 0 bps -10.0% FY05 FY06 FY07 FY08-100 bps Offshore Revenues Impact on Operating Margins (RHS) Moving towards 45% revenue from offshore Positive impact on operating margin: up to 25 bps from each percentage point shift offshore
2009: Focus On Operational Excellence To Maximize Profitability Utilization Offshore Leverage SG&A Cost Mgmt Employee Cost Control Focus on cost management actions FY 2008: Active cost control program 65 bps cost improvement without Rupee appreciation FY 2009: On-going programs Shift of selling costs to low cost locations, where possible Cost management programs, including communications Improved utilization, lowering bench costs
2009: Focus On Operational Excellence To Maximize Profitability Utilization Offshore Leverage SG&A Cost Mgmt Employee Cost Control Employee Cost Control Annual wage increase held to 10% About 250 bp impact vs. 316 bp impact in FY 2008 Broaden pyramid Shift in Fresher/Lateral hiring ratio From 45/55 in FY2008 to 60/40 in FY2009
Sustaining Profitable Growth FY06 FY07 FY08 INR m % of Revenue INR m % of Revenue INR m % of Revenue Revenue 132,455 186,332 228,614 Operating Income 33,894 25.6% 46,444 24.9% 53,651 23.5% Net Income 28,831 21.8% 41,315 22.2% 50,191 22.0% FY 2008 Operating Margin: 24.6% adding back FX gain in Other Income 25.6% without Rupee appreciation
In Summary Well-poised to sustain strong growth Markets, Service Offerings and Delivery Locations are diversified Focused on maximizing profitability Utilization Offshore Shift SG&A Cost Management Employee Cost Management Maturing of Strategic Initiatives
Profitable Growth Through Financial Leadership S. Mahalingam Executive Director & Chief Financial Officer TCS Analyst Day, New York