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The June quarter numbers of Infosys present a study in contrast to those of TCS across most measurable metrics. Compared to Infosys, TCS delivered much more broad-based growth across verticals and geographies. Operationally, while attrition is at healthy levels for TCS, Infosys has witnessed a huge spike in this parameter. However, with reference to large-size client additions, Infosys delivered a better performance than TCS.
In the first quarter of this fiscal, Infosys’ revenues increased by 0.9 per cent sequentially in dollar terms (2.1 per cent in constant currency), while net profit declined by 6.5 per cent. TCS’ revenues grew by 1.6 per cent (4.1 per cent in constant currency).
Moderate performance
In the June period, Infosys had a mild decline in revenues in its financial services vertical (31.8 per cent of revenues), while TCS reported a 3.7 per cent sequential increase from the BFSI segment in constant currency.
Mixed show
Communication and Life Sciences too were weak for Infosys, while the energy, utilities, resources & services and retail verticals delivered healthy growth.
In contrast, all verticals expanded for TCS at 2.3-5.9 per cent sequentially. Thus growth has been fairly broad-based for TCS.
In terms of geographies, revenues from North America and Europe grew at 2-2.1 per cent for Infosys.
For TCS, the increase in revenues from these geographies was much faster at 3.7 per cent from North America, and 5.3-8.2 per cent from continental Europe and the UK.
Attrition was 11.7 per cent for TCS, while for Infosys it was nearly double that level at 23 per cent, which is among the highest in the industry.
On large-size client additions, Infosys scored by adding four customers in the $100 million category. TCS managed two clients in the same bracket.
Lagging the leader
In a seasonally strong June quarter, Infosys’ results have been somewhat moderate. For now, TCS seems to have clearly justified its leadership position by virtue of its financial performance and is likely to command premium market valuations.
Infosys is still guiding for 6-8 per cent revenue growth in FY19, even as TCS is all set to deliver double-digit growth in FY19.
The trade body Nasscom has projected 7-9 per cent growth for the industry.
TCS trades at 28 times its trailing earnings, while the price-earnings multiple is 18. For the foreseeable future, the gap in premium is likely to remain, if not expand further.
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