1 week Ago By Agnidev Bhattacharya
Global uncertainties set off by US President Donald Trump's tariff threats have thrown Tata Consultancy Services Ltd.'s near-term optimism to the wind, even as the company hopes for a good fiscal 2026, according to chief executive K Krithivasan."We were quite optimistic after the December quarter, and were in good shape until February.
But uncertainty set in with customers as tariff dialogues started intensifying from March," he told NDTV Profit in an interview.The information technology and services giant reported a muted March quarter performance on Thursday, with most metrics falling short of consensus estimate from analysts polled by Bloomberg.Client uncertainty around discretionary spends have resulted in some project deferrals and delays in the March quarter, while some projects have also seen a reduction in their scope, Krithivasan said.
However, there have been no cancellations.The consumer business, especially, saw some pressure and delays in discretionary projects, especially in the US, he explained. "This was driven by a significant drop in consumer sentiment in February, which preceded changes in global trade and tariff, creating a domino effect on retail and related industries," he later told analysts in a post-earnings call.
K Krithivasan, Chief Executive Officer, Tata Consultancy Services Ltd.I am not as optimistic as I was in January, but I am not pessimistic either.TCS To Hire 42,000 Freshers, Wage Hike Decisions Remains Unclear Amid Tariff WoesThe Margin StoryTCS' operating margin for the fourth quarter stood at 24.
2%, reflecting a sequential decline of 30 basis points. The last leg of a drying BSNL order was a contributing factor, Krithivasan said.He was talking about the Rs 15,000-crore order that a TCS-led consortium had won from BSNL, for deploying 4G across India in 2023.
This mega deal was a major contributor in the IT bellwether's sustained growth in the domestic market over the last year and half. But the order is now almost completely executed. "It will take a couple of more quarters for the BSNL order to wind down completely," he reiterated.
The company later told analysts that margins were also hit by a 100 basis point headwind due to employee interventions and an added 60 basis point headwind from marketing and CSR initiatives."In fiscal 2025, 1 lakh employees were promoted in TCS," Krithivasan told NDTV Profit, "And thus, employee expenses went up." The company's employee benefit expenses rose by Rs 800 crore on a sequential basis to Rs 36,762 crore for the fourth quarter.
Its margins did not see any contraction due to pricing pressure from clients, he added.Chief Financial Officer Samir Seksaria later told analysts that TCS looks to improve margins on broad-based revenue growth, efficiency, and better operating leverage in fiscal 2026.TCS Q4 Results: Net Profit Falls 1.
26%, Margin ContractsBFSI And Europe OpportunitiesWhile the company's India business was being dragged by the BSNL order execution, its overseas segments showed positive growth, Krithivasan elaborated. "Demand remains quite resilient in the banking, financial services, and insurance sector despite tariff threats," he said. The BFSI segment contributed Rs 24,257 crore, or about 37%, to the company's topline this quarter.
However, the margin for the segment dropped by nearly 100 basis points on a sequential basis to 26.28%."While the orderbook for BFSI has been around $4 billion, within the segment, the insurance sector has shown some softness, especially in North America," he added.
The company is also seeing strong demand in the aircraft industry, while auto industry continues to be weak.As the sentiment for discretionary spends improves in Europe, TCS is also looking to participate in more deals in the region, Krithivasan said. "We are having discussions on sovereign and private cloud services in Europe.
Our defence exposure is quite limited, but we are looking at opportunities to grow there," he added.Deal Wins And OutlookThe company's total contract value for the March quarter stood at $12.2 billion, up from the previous quarter's $10.
2 billion."Our fourth quarter deal wins did not see a major change from the third quarter in percentage terms," Krithivasan said. "Given the global uncertainty, there will be some delays and reduction in TCV going forward," he added.
The company's long-term outlook is not affected by the overall macro environment, and similar to how he had said that calendar year 2025 would be better for TCS than calendar year 2024, he expects the same to hold true for the new fiscal.TCS Declares Rs 30 Per Share Final Dividend For FY25 . Read more on Business by NDTV Profit.
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