TCS sees pricing rise on strong demand

After a lull for about six quarters, the country’s largest IT services exporter TCS is expecting an uptick in the pricing in 2011-12. A faster recovery in the US market and an overall bullish environment in the business are said to be key reasons for the expected upward correction in prices.

“After six quarters, we are seeing increase in pricing with the demand growing. The demand is seen coming in more from sectors like BFSI and retail,” N Chandrasekharan, managing director and chief executive officer of TCS, said.

The company is said to be in talks with various customers targeting 20 large deals. According to the company’s internal metrics, a large deal is worth $50 million spread over multiple years.

While witnessing growing opportunities in areas like compliance and analytics, Chandrasekharan said the discretionary spend and the overall business environment were turning positive.

“The US is recovering fast but Europe is lagging. We expect a better growth rate there,” he said.

In October-December, the country’s largest software exporter saw 1.8% sequential growth in pricing. The company also saw 5.7% sequential growth in business volumes, reflecting a strong demand environment.

Despite the perceived growth in IT adoption in the domestic market, the company does not expect much contribution from the domestic market to its top line.

The market would, however, continue to contribute about 8-12%.

“We don’t see any increase in the pie if we keep in mind the size of the overall domestic market,” he said.

He said the company could improve margins by 500 basis points in the last 6-8 quarters. “We are operating at the best margin levels,” he said.

With the overall situation turning positive, the company is planning to announce a wage hike. It is likely to be announced during the fourth quarter results in April this year.

The company had hired 50,000 in the first nine months of 2010-11. “We have given 37,000 campus offers for 2012. We will come out with specific numbers during the earnings call next month,” he said.