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Tata Consultancy Services
What we learnt from TCS HR Head?
Event
ƒ We met Mr Ajoy Mukherjee, Vice-President and Head (Global Human
Resources) at TCS, for a one-on-one discussion. The key takeaways from the
conversation were the strength of demand and the internal organizational
capability of TCS to cater to this growth opportunity.
Impact
ƒ 80%+ utilization level: The new normal. With more than 186k employees on
its rolls, utilization levels have to be seen in a new light. We believe
exponential growth in the employee base implies that a comparison with
historical trends might not be fair. TCS agreed that the current utilisation is
stretched but does not see this as a threat to margins.
ƒ Expanding talent pool with ‘ignite’ program. With a large pool of science
graduates in the country, TCS aims to transition Bachelor of Science (B.Sc)
graduates into the software industry with its focused training program. More
than 2,500 graduates have been trained under this program. This gives the
company flexibility of balancing the bulge in the pyramid and managing costs.
ƒ International workforce provides scalability. TCS has 6.8% of its total
workforce from over 90 nationalities. Latin America, China and Budapest form
the major regional delivery centres, comprising 44%, 11% and 5% of its
international employees, respectively. The company finds competitive talent
pools in these markets for its operations, and the local operations can be
scaled with local personnel as per the demands of the customer.
ƒ What is the pain point? - Niche skills. Resurgence in growth has intensified
the talent crunch. This is more pronounced in case of employees with niche
skills such as solution architects, techno-functional roles, etc.
ƒ 37k campus offers for FY12, bulk of it already done. TCS would be visiting
450+ colleges to make campus offers for FY12. Under the normal hiring and
training cycle, campus hires start joining from June and undergo a threemonth program. During the economic downturn, the company had increased
this program to five months, which has been cut back to the standard three
month since January 2010.
Earnings and target price revision
ƒ No change.
Price catalyst
ƒ 12-month price target: Rs1,360.00 based on a DCF methodology.
ƒ Catalyst: Large deal wins & FY11 results.
Action and recommendation
ƒ Reiterate OP. With multiple levers of managing the pyramid bulge (ie, lateralfresher ratio, utilization and wage increment cycle), we believe the company is
on the path to achieve 22% EPS growth in FY12
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Tata Consultancy Services
What we learnt from TCS HR Head?
Event
ƒ We met Mr Ajoy Mukherjee, Vice-President and Head (Global Human
Resources) at TCS, for a one-on-one discussion. The key takeaways from the
conversation were the strength of demand and the internal organizational
capability of TCS to cater to this growth opportunity.
Impact
ƒ 80%+ utilization level: The new normal. With more than 186k employees on
its rolls, utilization levels have to be seen in a new light. We believe
exponential growth in the employee base implies that a comparison with
historical trends might not be fair. TCS agreed that the current utilisation is
stretched but does not see this as a threat to margins.
ƒ Expanding talent pool with ‘ignite’ program. With a large pool of science
graduates in the country, TCS aims to transition Bachelor of Science (B.Sc)
graduates into the software industry with its focused training program. More
than 2,500 graduates have been trained under this program. This gives the
company flexibility of balancing the bulge in the pyramid and managing costs.
ƒ International workforce provides scalability. TCS has 6.8% of its total
workforce from over 90 nationalities. Latin America, China and Budapest form
the major regional delivery centres, comprising 44%, 11% and 5% of its
international employees, respectively. The company finds competitive talent
pools in these markets for its operations, and the local operations can be
scaled with local personnel as per the demands of the customer.
ƒ What is the pain point? - Niche skills. Resurgence in growth has intensified
the talent crunch. This is more pronounced in case of employees with niche
skills such as solution architects, techno-functional roles, etc.
ƒ 37k campus offers for FY12, bulk of it already done. TCS would be visiting
450+ colleges to make campus offers for FY12. Under the normal hiring and
training cycle, campus hires start joining from June and undergo a threemonth program. During the economic downturn, the company had increased
this program to five months, which has been cut back to the standard three
month since January 2010.
Earnings and target price revision
ƒ No change.
Price catalyst
ƒ 12-month price target: Rs1,360.00 based on a DCF methodology.
ƒ Catalyst: Large deal wins & FY11 results.
Action and recommendation
ƒ Reiterate OP. With multiple levers of managing the pyramid bulge (ie, lateralfresher ratio, utilization and wage increment cycle), we believe the company is
on the path to achieve 22% EPS growth in FY12
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