Infosys, TCS buoyed by big contracts in Q2

The September 2019 quarter has brought good tidings for both Tata Consultancy Services (TCS) and Infosys.

Both the firms reported a record Total Contract Value (TCV) — the size of deal struck with customers — of $9.2 billion (combined). TCV reflects an IT company’s ability to win large deals, including renewals.

TCS reported a TCV of $6.4 billion in Q2 — the highest in the last six quarters. Similarly, Infosys recorded a TCV of $2.8 billion, the highest-ever for the company.

Wipro has not provided the deal numbers. These numbers suggest that the environment is turning positive for the IT sector.

Sanjeev Hota, Head of Research, Sharekhan by BNP Paribas, said that early investments, ability to stitch together large multi-service deals, and participation in clients’ digital transformation journey are the factors that helped TCS win large deals.

He added that Infosys had made incremental investments in people and digital capabilities in the previous year, which is yielding results now.

Both Infosys and TCS are doing well in terms of deal wins. “We believe that this is a confirmation of the strong order booking for offshore IT services players as digital spending is becoming mainstream and global corporates are investing in terms of their mid-office and back-office transformation,” said an analyst at Emkay Global Financial Services.

Increased order intake

The analyst added: “The Tier-1 players have been talking about increased scope and size of deals over the past 18-24 months and the order intake numbers announced in September quarter are a validation of the same.”

TCS’ CEO Rajesh Gopinathan shared the same view at a recent analysts call.

“The strong order closure and deal pipeline is an indicator of our growing traction within the customer innovation spends. Our investments in research and innovation and our large portfolio of intellectual property are positioning us well to help customers scale up their innovation efforts,” he said.

Salil Parekh, CEO, Infosys, told analysts while discussing the financial results that client metrics remained strong with the company adding 96 new clients during the quarter.

The number of $50-million clients increased by 2 to 61, and the company won 13 large deals with the TCV of $2.85 billion, which is the highest ever.

“While a large part of this was renewals, these renewals solidify our position significantly in our existing client base. Large TCV is up by 75 per cent in the first half of 2019-20 over the same period last year,” he added.