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Three of the larger software companies - TCS, HCL Technologies and Infosys, have managed to beat market expectations for the December quarter. After Infosys’ reasonable show, HCL and TCS reported a strong set of numbers despite the quarter being a seasonally weak one for IT players.
HCL led the pack with a 4 per cent sequential growth in revenues in dollar terms, while TCS and Infosys managed 3 per cent and 1.7 per cent respectively.
The growth has been reasonably balanced for all the three players, with Europe witnessing significant traction and key verticals expanding. For TCS and Infosys, the high margin enterprise services expanded, while growth was led by infrastructure management services in the case HCL. Customer additions too have been quite robust during the quarter.
Key segments grow:
While the US has been growing at a steady pace, revenues from Europe have grown in excess of 5 per cent for all the three players, suggesting a significant revival in outsourcing in that continent.
Again, BFSI, manufacturing and retail grew at a healthy pace, ahead of the overall revenue rate of the respective companies for the software majors. Among the three, TCS alone continues to witness healthy growth in its telecom vertical as well, even as others struggle to ramp up revenues from the segment.
For Infosys and TCS, enterprise services grew 2-3.5 per cent and helped margins. In the case of HCL, infrastructure management services offering grew at a strong 6 per cent sequentially during the quarter. Discretionary spending of clients thus appears to be better tapped by TCS and Infosys compared to HCL.
In terms of client addition, Infosys alone had increases in the $300 million and $200 categories, along with increases in the sub $100 million bucket.
While HCL had 6 new customers in the $10-30 million category, TCS had similar additions in the $20-50 million bucket.
Utilization, at over 84 per cent, for both TCS and HCL is quite healthy. Infosys lags behind in this regard as it operates at a rate of 78 per cent.
Given its consistent show, HCL appears well set to bridge the valuation gap between its shares and those of Infosys and TCS.
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