Markets have been waiting for this transition where the old business takes a back seat, the new business takes over. This in a sense has been the central concern for everybody with the advent of AI and other new technologies. Has that changeover happened?
Samir Seksaria: AI is not something which has just turned up. It has been here for a while. The new terminology is Gen AI. Gen AI as a theme is in the initial stages right now. What we see at customer ends is also more POCs, elementary work, things around translation work or low-end work happening. It definitely has potential, but it will take its own time till it evolves. We are benefiting from something called AI enablement where people are putting in their structures around cloud and data together to build up and to participate in AI as it evolves. That is how it is stacked up as we see it currently.

Margins have gone back to this long-term ideal range for TCS – 26 to 28. Is this the beginning of that turn which we’ve been waiting for for the business?
Samir Seksaria: We are very pleased with getting back to our guiding beacon or touching it and that is something which we have always believed in and if we look at, it has been structural for the past three quarters we have been giving approximately, we have been having approximately 100 basis points plus-minus improvement sequentially in each of the quarters. So, yes, to that extent, it is a good thing and we believe if the macro environment improves and growth comes back, growth being a bigger lever, it will help us accelerate this journey better. Else we are quite happy with where we are exiting Q4.

It is that time of the year when we start talking about next year. Now without getting into specific number guidance, I will put a double digit number as the big number. For the industry per se this year, is the double digit number an aspirational number or can the industry achieve it this year?
Samir Seksaria: If we look at how the macro has played out in the last one year, from a near term, the uncertainties continue. From a medium to long term, we are quite positive on it given the deal wins which we have had, the drivers in terms of the demand drivers which play out whether it is on the AI side or in terms of the cloud transformation or vendor consolidation. So, things are stacked up well. On double digit returns, the reason we do not give guidance is we do not want to get into that view. So, I will not take a view on that.

Progressively if I have to mark the trajectory, which is what we are trying to look at, gradually or slowly, is it headed higher?
Samir Seksaria: If I take the current quarter itself, the trajectory is better than what we had had in the past couple of quarters, three quarters and we are hopeful that FY25 will be better than FY24.

That is all I think I will get in terms of forward comments from TCS, but we often look at employee addition, utilisation rate and new campus offers. This in a sense is an indirect indication of where business is moving. Two years ago, the first question was attrition. Now attrition is under control. Next question is headcount. If one looks at the quarterly numbers, despite a drop in attrition, the headcount number is down. Should we read anything into it?
Milind Lakkad: No, whatever I have been saying for the last few quarters stands even now and also our efforts driving productivity and efficiency also played a significant role there in terms of driving basically utilisation more.

What was the number for last quarter?
Milind Lakkad: We do not give away utilisation numbers, but in general utilisation is going up and all of that together, if you include it becomes a small negative headcount as an outcome, that is the way I will look at it. I will not read too much into demand or anything else because we are a 600,000 people organisation. We have enough headroom for optimising things internally.

Is this the new normal for TCS where the headcount is not the indication of whether the business is moving? Headcount could be lower, growth could be better, margin could expand, but that is because of productivity gain?
Milind Lakkad: That is what we try to do every quarter.And can you achieve that?
Milind Lakkad: That is what we have been trying to do every quarter. But when you get into a business environment where you see a significant growth coming in, sometimes we end up hiring proactively and that is what we have done in FY22, FY23 and that is something which we did because of the situation then. Currently the situation was like this, so we went this way. I will actually go and hire more people going forward depending on the business situation and what we have been doing so far is not going to change. But I will hire based on the business situation. If the situation continues like this, I will moderate.

Another factor which may have changed things for you is the fact that over the last three-four quarters, you migrated the work from home model to back to office model. How has that changed things for you? And how many employees are back now?
Milind Lakkad: Right now, we are targeting everybody to come to the office. Everybody has to come to the office and that number is going up rapidly every quarter on quarter. I expect to basically get back to pre-pandemic levels in about a quarter’s time.

So, how will that change life for TCS, productivity, margins?
Milind Lakkad: It was never about productivity and margins. It was always about culture. It was always about being together. It was always about having the TCS way which everybody learns by being with each other. It is about learning from each other. It is about having fun together at work.

So, can I say work at home not for TCS but in general everybody has been more like a concept idea. It was more at a lab stage, but it is something which the world is not ready to adapt to?
Milind Lakkad: I will not say one way or the other, different companies are doing different things. We believe this is the right thing to do and right now this is what we will go forward. Going forward if we have to make some tweaks later on, we will look into that as well.

Let us understand the margin picture, 26%. How much of that is coming largely because of better client engagement, better billing rates? How much of that uptake is because of business? How much of that is because of productivity?
Samir Seksaria: So, let me give you the 100 basis points improvement which we had. This was in spite of headwinds of 90 basis points coming in from higher third party expenses and also increased travel expenses. And this was offset by 190 basis points benefit primarily coming out of, bottoming out of our subcontractor cost and productivity and utilisation gains.

So, nothing has improved on the business front, can I say that?
Samir Seksaria: The pricing is stable, so it is a more disciplined execution and focus on operational rigour which has delivered this margin.

How do you see FY25 moving? It is that time of the year when everybody will start talking about new campus hiring, talent at IT. How are things looking?
Milind Lakkad: We are the first ones to go to campus this year and we have already finished our first exams and offers to colleges and our national qualifier test currently is in progress, means the registrations are going on right now and we will have a national qualifier test soon. So, right now the plan is as usual. But we will obviously play it by the year in terms of onboarding them over the year.

Let me ask a direct question to the HR head of India’s largest IT company. Is there enough and more talent available at engineering colleges which can adapt to the new demand of IT services or do you need to remodel and engineer them?
Milind Lakkad: The answer is simple. We have always believed basically that there is good talent. There may be raw talent, but it is good and it is our responsibility to polish that. It is our responsibility to turn them into somebody productive for our customers and that has been our policy all along since inception of TCS and that worked for us. So, while academia will do their job, we need to do a significant job on top of that to basically make people productive. And whether it is technology, one technology today or another technology tomorrow, that job will remain.

The relevance of what the campuses today are training and incubating does not change. I am asking this again because that in a sense is an important question.
Milind Lakkad: No, we had a sangam where we have a meeting of minds and all the vice chancellors and directors of all major institutions in India, all IITs, NITs, IISCs, IIMs – all premium institutions – came and we spent a good day-and-a-half with them. Primary purpose is basically how do we integrate better. We have done a lot of jobs together so far to get to the point where we are, but we can do a lot more and that is what we will continue to do. This is a journey and more and more integration, more and more backward integration, more and more how do we shift left more so that we get industry ready people quickly.

I will just throw two numbers at you. These numbers are for the BFSI space and North American market, that is like the bread and butter for you. For the quarter gone by, there is a dip in North America, there is a decline in BFSI, while other verticals may have taken care of the decline, but net-net this is the big headline for me that BFSI has dropped, North America is going down. Is this a trend or just one-off?
Samir Seksaria: What has helped us is a diversified portfolio. North America as well as BFSI had a tough year and what has balanced us and helped us grow better than the industry is a diversified portfolio where the emerging markets outperformed. Segments like manufacturing from a vertical perspective, energy and utilities had good double-digit growth. Our markets in Middle East and Africa, LATAM, India have had significantly high double-digit growth.

For FY25 also, we see a similar trend – BFSI declining, North America declining and other verticals firing up?
Samir Seksaria: It should improve from where we are.

Even for BFSI and North America?
Samir Seksaria: Both the segments, North America separately and BFSI we do not call out BFSI North America per se, but yes there would be a big component of BFSI.

If I wrap the first leg of our today’s interaction, let me just take this message back for the viewers and for investors that the top management of TCS feels that the worst is behind us and the trajectory has started picking up. You can read that in margins and FY25 will be better than FY24.
Samir Seksaria: Absolutely.