TCS signs deal with M&S; expects $1 billion retail sector business in Europe to outgrow its overall revenue

A senior official has said that TCS expects the $1 billion retail sector business in the UK and Europe to outpace the company’s overall revenue growth on the back of strong demand for IT services. On Wednesday, the country’s largest software exporter announced a multi-year, multi-million dollar deal with Marks & Spencer, with which it has been working for over a decade, to transform the British retailer’s human resource operations.

The company’s business head of retail in Europe, Abhijit Niyogi, told PTI that the demand for IT services remains strong in Europe and the UK despite macro headwinds like inflation, rate tightening, and political turmoil in the UK and the ongoing Russian invasion of Ukraine.

Stating that the business headed by him has a topline contribution of over $1 billion a year, Niyogi said it has been clocking a revenue growth faster than the one reported by the company on an overall basis for the last two-three quarters.

Around 10-15% of the company’s total contract value (TCV) comes from the business.

Currently, it is chasing mid to large-size deals with a revenue possibility of around $300 million, as demand from retailers continues in the market.

When asked if he sees the business continuing to outpace the company’s broader revenue growth, Niyogi replied in the affirmative.

“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 robust, the conversion ratio is also quite good, and the demand is at an all-time high,” he added.

In the first quarter of the fiscal, TCS reported a 10.2% growth in revenues to $6.7 billion, with the retail sector leading the pack with over 25% growth in revenues on a constant-currency basis.

He said the retailers want their software vendors to be partners in good times and testing times and added that clients are not so sceptical because of the macros.

The profit margins are typically wider in growth and transformation deals like the one signed with M&S because clients want to invest in futuristic services relevant to their customers and the brand’s importance.

About 70% of the work on the M&S deal will be offshored to India. At the same time, the rest will take place locally in the US, Niyogi said, adding that much of its existing staff with domain expertise who understand regulatory processes governing the retail sector in the UK will be deployed on this project.

While TCS has worked on HR solutions in the past, the work for M&S, which has over 80,000 employees, is new because it is being carried out on the Oracle supply chain management platform, he said.