TCS Strategizes to Offset BSNL Revenue Gap

TCS Eyeing Multiple Opportunities to Mitigate BSNL Deal Revenue Loss: CEO Krithivasan

India’s largest IT services company, Tata Consultancy Services (TCS), is poised to navigate the anticipated revenue downturn from its substantial BSNL contract by exploring multiple new opportunities, both domestically and internationally. The Rs 15,000 crore deal with Bharat Sanchar Nigam Limited (BSNL) has been a significant contributor to TCS’s growth in the Indian market, even amid a global demand slowdown.

BSNL Contract Nears Completion

The BSNL contract, which involves setting up data centers and 4G sites across India, is now 70 percent complete. According to TCS’s Chief Executive Officer and Managing Director, K K Krithivasan, the revenue impact from this mega-deal will begin to taper from the fourth quarter (Q4) of the current fiscal year. Krithivasan assured investors during the post-earnings call that TCS is actively seeking multiple avenues to bridge the impending revenue gap.

“The BSNL contract is 70 percent complete, which means that its revenue impact will start tapering from Q4 itself. We’re looking for multiple opportunities to compensate for the revenue gap from this contract,” Krithivasan stated. He expressed confidence in the company’s ability to replace most of the revenue void through new deals, both domestic and international.

Strategic Diversification

Krithivasan emphasized TCS’s strategic focus on diversifying its revenue streams to mitigate the impact of the BSNL deal winding down. “Though its replacement is definitely a headwind, we still know we will be able to replace most of it,” he said. This diversification strategy includes pursuing growth in major markets and leveraging recovery from furloughs to sustain momentum in the coming quarters.

Revenue contribution from the BSNL deal is expected to continue until the first or second quarter of FY25, as per TCS management. There’s also a possibility of extending the collaboration with BSNL, supported by TCS’s involvement in setting up future-ready 5G infrastructure for the telecom provider.

Sustained Growth in the India Market

The BSNL partnership has been instrumental in driving TCS’s growth in the Indian market over the past quarters. In Q3, TCS’s revenue in India surged by 70.2 percent year-on-year in constant currency, following a remarkable 95.2 percent year-on-year growth in the previous quarter. These impressive figures highlight the pivotal role of the BSNL deal in bolstering TCS’s overall revenue amidst challenging market conditions.

Krithivasan remains optimistic about TCS’s growth trajectory. “We believe that even as BSNL revenues pan down, growth returning in major markets—international and regional—and recovery in furloughs should help us sustain growth in Q4,” he noted.

Conclusion

TCS’s proactive approach to mitigating the revenue loss from the BSNL deal reflects its robust strategy and resilience. By focusing on diversifying its revenue streams and capitalizing on emerging opportunities, TCS aims to maintain its growth momentum in the face of potential headwinds. With the BSNL contract nearing completion, the company’s strategic initiatives and potential new deals are expected to play a crucial role in sustaining its growth trajectory.