All-round growth for TCS

TCS’ September quarter numbers have once again demonstrated its leadership among Indian IT players as the company beat market expectations and delivered results that were much stronger than what its peer Infosys reported a few days ago.

The company now looks comfortably placed to beat trade body Nasscom’s estimated growth rate for the industry of 12-14 per cent for this fiscal.

Strong volumes, growth across key verticals such as BFSI, addition of large-size clients and continuing traction in key geographies, especially Europe, were highlights for the quarter.

During the period, TCS witnessed a 16.6 per cent sequential growth in its revenues (5.4 per cent in dollar terms) and a 23.9 per cent rise in net profits. Infosys managed a 3.8 per cent growth in revenues in the September quarter.

Delivering consistently

TCS managed a whopping sequential volume (man months billed) growth if 7.3 per cent, much higher than Infosys’ 3.1 per cent expansion. The acquisition of Alti, a French IT service company in April this year has marginally helped volumes and revenues, though even organically, the numbers are quite robust for TCS.

One area of mild disappointment may be that TCS had a slippage in realisations (94 basis points), while Infosys managed a slight improvement in this front. But the company has indicated that pricing will largely be stable.

All the verticals grew by double digits for the company led by its largest segment – BFSI, which managed to grow at 17 per cent sequentially, faster than the overall company’s revenue rate. Clearly, there has been an all-round for the company.

For Infosys, the growth was led by verticals such as manufacturing and energy & utilities.

Revenues from key geographies, North America and Europe grew for TCS. Sales from the latter grew at a faster pace than the overall company’s rate. Infosys too witnessed growth from both geographies, suggesting that the largest outsourcing regions seem to be witnessing steady improvements in IT spends.

Winning large deals

Another area where TCS has managed to beat Infosys during the second quarter was in winning large deals ($100 million plus) as it managed to add three more customers in this category. Infosys did not make any additions in that bucket.

TCS is quite likely to keep the premium at which it trades over peers, given the consistent performance in results.

Going by the past few quarters, there hardly seem to be any weak links in any of its segments and service offerings, which means that expectations and benchmarks would be raised for TCS.

It may be quite challenging for any of the other top-tier players to match the company’s performance, much less exceed it.

COMMENT NOW