TCS, India’s largest software exporter, recently inked a deal with British retail giant, Marks & Spencer to transform the retailer’s human resource operations. A senior official stated that TCS expects the $1 billion retail sector business in the UK, Europe to outdo the company’s overall revenue growth based on strong demand for IT services.
In the deal, around 70% of the work will be offshored to India, while the rest will happen locally, in the US. The deal is a multi-year, multi-million-dollar one and TCS has been working with the retailer for more than a decade.
Abhijit Niyogi, the company’s business head, retail (Europe), said in a statement that the in Europe and the UK, the demand for IT services remains strong. This, despite macro headwinds such as inflation, rate tightening, the political chaos, and the ongoing Russia-Ukraine war.
Niyogi further added that the business he headed has a topline contribution of more than $1billion a year and it is growing in revenue faster than the one reported by the company on a total basis for the last two-three quarters.
The business contributes about 10-15% of the company’s reported total contract value (TCV). Currently, it is chasing mid- to large-size deals, likely having a future revenue of about $300 million, as demand from retailers continues in the market.
Niyogi also expects the business to continue outpacing the company’s broader revenue growth. Speaking on that he said, “At least in FY23, I don’t see any slowdown specifically at the back of a very strong Q1. What we see for Q2 and Q3, the pipeline is very strong, the conversion ratio is also quite good, and the demand is at an all-time high.”
TCS reported a 10.2% growth in revenues to $6.7 billion in the first quarter of the financial year. The retail sector was the frontrunner in the segment with more than 25% growth in revenues on a constant-currency basis.
Niyogi further stated that the retailers want their software vendors to be partners in good and testing times and also clients are not disbelieving of the macros.
In growth and transformation deals such as the M&S one, the profit margins are generally wider in growth. This is because clients wish to invest in services that are futuristic and of relevance to consumers as well as the importance of the brand.