Tata Consultancy Services (TCS) chief executive K. Krithivasan and Tata Sons chairman Natarajan Chandrasekaran huddled with the company’s top 800 executives last week to sketch out a detailed plan for the company’s future, two executives privy to the Abu Dhabi gathering said.
First, the headline goals. At the annual strategic retreat titled Blitz, CEO Krithivasan said he wants TCS to clock at least double-digit revenue growth in 2024-25. That would mean more than 10% growth, double the 5.2% dollar growth it is expected to report in 2023-24. Its slowest growth since it went public in 2004 was 5.3% in the year ended March 2010.
Even as he urged each executive to think of one bold idea that could become a big business opportunity, Chandrasekaran said he wants India to become a $10-billion market for TCS—a big (eventual) aspiration of a more than seven-fold increase from the current $1.4 billion.
TCS clocked revenue of $27.9 billion in 2022-23. The company does not give any revenue or profit guidance, so these comments give an insight into the management’s thinking.
Next, the more specific goals. Krithivasan outlined the firm’s strategy, titled Refresh, Realign, and Reinvent or RRR, coincidentally the name of a superhit Telugu movie. Under TCS’s RRR, teams were pressed to modernize the company’s offerings in the infrastructure management and application development areas.
The management expects businesses to scale up in emerging industries like electric cars, semiconductor designs and digital currencies, especially in light of the emergence of generative AI, according to some of the slides of a presentation that were reviewed by Mint.
On the geography front, TCS is expected to strengthen its offerings in European countries such as Spain and Italy, and in the Latin American continent as well.
“A leadership refresh across the organization” was another important subject of discussion during the event, although Mint could not independently ascertain what it would entail.
Finally, TCS wants to further grow its share of business from some of its larger customers, even as Chandrasekaran and Krithivasan nudged the teams to collaborate with other group firms of the Tata group.
But above all, TCS expects faster growth next fiscal year, according to the executives cited above, because of a string of large deals. Earlier this year, TCS won a $2.5 billion deal over 15 years from British insurance group Aviva, which was the third such mega deal (IT contracts valued at over $1 billion) won by the company under Krithivasan, who took over as the boss last June.
In June itself, TCS bagged a $1.1-billion contract for 10 years from the National Employment Savings Trust, one of the UK’s largest workplace pension schemes. And in September, Jaguar Land Rover, owned by Tata Motors, awarded $1 billion for work over five years to the IT company.
“Chandra reminded us that as the market leader, we should not become complacent. He asked each of the business units to think of one audacious or bold idea that could eventually become a big business opportunity for the company,” the first executive said on condition of anonymity as he is not the spokesperson of the company. “The digital and platform story in India is one example which the chairman cited, saying how there is no reason why India should not become a $10 billion market for us (TCS),” said the executive.
“Companies like Atos and Kyndryl are struggling for growth and customers of these companies is another area we need to tap better,” said a second executive. For instance, the executive cited how National Employment Savings Trust first awarded a $1.8 billion, 18-year contract to French IT firm Atos in 2021 only to cancel the deal two years later, eventually leading to TCS winning the contract last year.
“TCS is expected to do better in FY25 than in the current year,” said a Mumbai-based analyst at a foreign brokerage. “The problem is that the company does not give any guidance. So, it’s difficult to interpret if this double-digit growth is an aspiration or an internal target. (But) the sales engine is doing well and that shows up in large deal wins. I guess we’ll need to hear the management post the first quarter performance on how the company will do in the next financial year.”
The renewed vigour at this year’s Blitz was in contrast to the listless sentiment last year when a fortnight after the strategic event, incumbent CEO Rajesh Gopinathan abruptly resigned, paving the way for the appointment of Krithivasan.
For over two decades, TCS has served as the Tata group’s crown jewel and cash machine, spewing billions of dollars of cash, almost all of which is returned to shareholders. Tata Sons, which owns 72.4%, has used that cash to fund the group’s new bold bets, including building a digital business under Tata Digital and buying planes. With a market cap of $180 billion at the end of 1 March, TCS is the country’s second most valuable company, behind Reliance Industries Ltd.
Incidentally, in 2022, Telugu movie RRR emerged as the highest-grossing Indian movie and even won an Academy Award for the song, Naatu Naatu. It remains to be seen if TCS can script a similar blockbuster.