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A Veteran’s Touch Works Magic At TCS
In FY 18 the TCS operating profit went beyond 25 %, which was the highest in the industry
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V Ramakrishnan took charge as Chief Financial Officer (CFO) of the Tata Consultancy Services (TCS) barely 14 months ago. In that amazingly short spell though, he has been able to effect changes swiftly across operational parameters of the IT services, consulting and digital solutions company. During his tenure, TCS has achieved an operating profit margin that goes beyond 25 per cent, which is the highest in the industry.
How did he pull it off? Part of the magic may have been possible because new though he is to TCS, Ramakrishnan is really an old insider in the Tata Group. He has spent three decades of his 37-year-long career in Tata Group companies, namely Tata Motors and Tata Elxsi and now, Tata Consultancy Services.
How did he do it?
Ramakrishnan feels that he has been able to contribute to and sustain growth in TCS by monitoring parameters like sustained efficiency in cash management and effective forex risk management. During the short stint that he has had with TCS, its operating cash flow to net profit ratio has been 109 per cent. The numbers speak for themselves, but even so, we did ask Ramakrishnan how he had been able to make a difference to TCS.
“The elevation to the position of CFO was quite sudden and unexpected,” muses Ramakrishnan. “The priority was to ensure seamless continuity in execution of strategy, external and internal communication and harnessing teamwork and collaboration. Glad that it has worked out,” he adds.
“The invested funds of the company as of March 31, 2018 was Rs 47,686 crores, almost at the same level as of March 31, 2017, when it was Rs 48,434 crore,” he goes on to say. “This is after carrying out India’s largest buyback programme of shares of Rs 16,000 crores in May-June 2017; and dividend distribution (including DDT) of over Rs 10,800 crores during FY18,” adds Ramakrishnan.
He has often aided the CEO in making decisions about the company. “During the last year, the company has not had any external mergers and acquisitions, or expanded into any new countries,” says Ramakrishnan. “However,” he points out, “business has significantly expanded in Continental Europe and grown organically in several countries in the Asia-Pacific region. To enhance operational efficiency and for simplification, few subsidiaries in Europe were merged”.
the speed-breakers on the way
Ramakrishnan has been instrumental in bringing about some key changes in the organisation. He has for instance, brought together the best of TCS in finding solutions for taxation and regulatory changes, cost management, in driving process improvement and simplification.
He did face some challenges though, such as slower growth in two key verticals during the last few quarters, which dragged down the overall growth in revenue during both FY17 and FY18. “Despite the slower growth, focus was on ensuring no constraints on investment in building capabilities or business development,” says Ramakrishnan.
Ramakrishnan is a key player within the organisation, taking it to new heights in dimensions other than mere financial parameters. “Governance is an important facet. In a large and spread-out operational environment with several business groups who have full P&L responsibility; it is important that policies and processes drive business performance and do not become a bottleneck,” he says.
“While risk management is critical; individual business teams should have the operational freedom to pursue business in an unhindered atmosphere,” says Ramakrishnan, adding. “Data-driven decision making and performance monitoring is very important”.