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Tata Consultancy Services clearly seems to have stolen a march over its peer Infosys by reporting stronger financials and delivering across operating metrics in the June quarter.
Superior volume growth, improvements in the telecom vertical, greater traction in fixed-price projects and stronger client additions have led to a fair degree of outperformance.
During the quarter, while revenues grew by 6.3 per cent to Rs 10,797 crore, net profits fell 8 per cent sequentially to Rs 2,415 crore. The fall in profits has been due to a 12.9 per cent increase in wage costs to Rs 4,206 crore, as a part of the annual salary hikes to employees.
This apart, TCS has managed a sound repeat business level, increased offshore component of revenues and also saw enhanced contribution from the manufacturing and retail verticals.
On these parameters though, Infosys too had delivered a reasonable performance, giving positive indications on the broadening base of consumer IT spends globally.
Key metrics robust
TCS had a volume (man-months billed) growth of 7.5 per cent, much ahead of market expectations and its peer. This increase is further exemplified by the fact that the utilisation level during the quarter was 83.2 per cent, which suggests a fairly robust growth environment.
That this has been achieved with stable to marginally higher pricing comes as an icing on the cake.
Contrary to the drop in the telecom vertical's revenues for Infosys, TCS saw a healthy growth in excess of 14 per cent sequentially from the segment.
Its main vertical BFSI and growing segments such as manufacturing and retail expanded in terms of revenues by 4-10 per cent.
Fixed-price projects that provide higher realisations compared to time & material contracts has seen marginal improvements and now accounts for 49.7 per cent of revenues.
Client additions, especially large-sized ones is another area where TCS has moved ahead, with as many as six new customers coming on board in the $50-million category and a couple of additions made in the $100-million band as well.
TCS also had a repeat business of 99.8 per cent, as was the case with its peer, suggesting strong client mining capabilities. The offshore proportion of revenues has improved marginally to 50.6 per cent, which will allow cost optimisation.
In a generally robust quarter for IT companies, clearly TCS seems to have gotten off to a head start over its rivals.
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