By Sankalp Phartiyal and Euan Rocha
MUMBAI (Reuters) – India’s top IT services company Tata Consultancy Services Ltd (TCS) is moving to capitalize on growth opportunities in areas such as life sciences and manufacturing, Chief Executive Rajesh Gopinathan said on Friday.
With IT spending in the core banking, financial services and insurance (BFSI) segment subdued in the United States – the largest market for India’s more than $150 billion software services sector – companies are looking at different sectors and a wider range of service offerings to drive revenue growth.
Gopinathan said in an interview with Reuters that technology was playing a growing role in not just the manufacturing process, but also in products, allowing companies such as TCS to target non-traditional sectors more than they did in the past.
“When we look at manufacturing, the extent of smart features that go into not just the manufacturing process, but the product itself are steadily increasing,” he said.
From smart refrigerators to connected cars, technology now plays a far bigger role in products, with the proliferation of the Internet of Things and embedded tracking devices helping companies manage logistics and inventory.
TCS posted slightly weaker-than-expected quarterly results late on Thursday, but it reported over 10 percent year-over-year revenue growth from clients in the manufacturing, life sciences and energy sectors.
The three combined currently account for less than 20 percent of TCS’s revenue and the BFSI segment accounts for a third.
Gopinathan also said that while TCS would have traditionally focused on servicing the sales and administration functions of such clients, it was now working with those companies even on the final products they market.
“We have a situation where we are under-penetrated in such sectors. On top of that the addressable space in these sectors is rapidly expanding,” said Gopinathan. “That’s a growth driver and an unfolding opportunity.”
Gopinathan said the mood among BFSI clients had turned optimistic with the prospect of a further interest rate hike by the U.S. Federal Reserve and the potential easing of regulatory requirements.
“Sentiment is definitely positive,” he said, adding that movement on interest rates and regulations could help trigger increased IT spending by BFSI clients.
Interest rate hikes can improve banks’ margins, while U.S. President Donald Trump’s administration is looking to ease regulations that were imposed on banks after the global financial crises.
The Mumbai-based company sees scope to expand in the BFSI market by adding smaller clients, such as regional banks.
The Indian market also offers a big opportunity for TCS as Prime Minister Narendra Modi’s flagship Digital India initiative could boost tech spending in Asia’s third-largest economy, Gopinathan said.
Sales in India, which accounts for 7 percent of TCS revenues, rose by around 13 percent year-on year in the quarter to June, coming in a close second to mainland Europe.
“I think as growth rates pick up back in India, we should see a pickup (in spending).”
(Reporting by Sankalp Phartiyal and Euan Rocha; editing by Susan Thomas)