Though TCS’ September quarter numbers fell marginally short of market expectations, its financials and keenly followed parameters have grown at a healthy pace.

In any case, it has once again convincingly scored over Infosys, which in itself reported healthy numbers, and is well on its way to be the industry leader in revenue growth in FY15.

Growth across verticals and geographies, robust large-size customer additions and continuous improvements in factors such as volumes and utilisation characterised TCS’ numbers during the quarter.

The company has also announced the merger of its subsidiary, CMC, which may further deepen its India footprint.

Its revenues grew 6.4 per cent sequentially in dollar terms, while net profits rose 3.2 per cent. For Infosys, the revenue growth was at less than half this rate at 3.1 per cent, though it put up a better show on the profits front.

TCS reported a strong 86.2 per cent utilisation rate, among the highest in the industry and

Volume (person months billed) growth of 6.1 per cent. Clearly, the company has had substantially better traction across segments compared with Infosys, which had volume growth of 3.1 per cent and utilisation of 82.3 per cent.

Continued outperformance

As with Infosys, growth was across verticals for TCS with manufacturing and energy & utilities leading the way. The banking financial services and insurance (BFSI) segment though had a tepid quarter. India and Asia-pacific experienced strong traction during the quarter, while North America and Europe managed to grow at a steady pace.

In terms of client addition, TCS added four customers in the $50-million category and nine in the $20-million bucket. Infosys, while managing somewhat similar numbers had an addition in the $100-million band as well.

Attrition is still under control at 12.8 per cent, while for Infosys it touched worrisome levels going beyond 20 per cent.

Leading the way

There appear to be almost no ‘pain points’ for TCS given that all key parameters continue to improve with regularity with every passing quarter.

With strong numbers in the first half of this year, TCS looks all set to finish the fiscal a good 2-3 percentage points ahead of the projected growth rate for the industry at 13-14 per cent for 2014-15. With these numbers, it would continue command a large valuation premium over Infosys and Wipro.

Even the fast growing HCL Technologies may not be easily able to bridge the gap in multiples.

Related Topics
comment COMMENT NOW