TCS vs Infosys: While Tata gem beat analysts' estimates on all parameters, latter's profit misses forecast; analysis in 6 charts

Software giants TCS and Infosys have published their June-quarter earnings. While Tata Consultancy Services' (TCS) results beat analysts' estimates on all parameters, Infosys' numbers disappointed on the net profit front though its revenue and guidance met estimates.

A revival in both the core client segment and key operational geographies, along with some help from currency gains, helped India's largest software exporter TCS to report a 6.8 percent sequential rise, and a 23 percent year-on-year jump, in June quarter net profit to Rs 7,340 crore. 

TCS announced its first-quarter results after market hours on 10 July. It posted a smart rise, both in its revenue and net profit. No wonder TCS shares surged 5.5 percent the very next day, adding Rs 39,281.74 crore to its market valuation.

TCS and Infosys logos. Reuters image.

TCS and Infosys logos. Reuters image.

The stock jumped 5.47 percent and closed at Rs 1,979.60 on the BSE. On 11 July, the scrip climbed 6.28 percent to Rs 1,995 -- its 52-week high.

"TCS first quarter results were better-than-expected on all fronts against our/street estimates," Emkay Global Financial Services had said in a report.

The country's second-largest software services major Infosys on Friday, 13 July, reported a 2.1 percent sequential decline, and a 3.7 percent on-year growth in consolidated net profit at Rs 3,612 crore for the quarter ended 30 June, 2018.

That compares with the Bloomberg consensus estimate of Rs 3,741 crore. Net profit was hit primarily by a Rs 270 crore reduction in the fair value of Panaya, the company said in a filing to the exchanges.

Infosys' revenue has risen 5.8 percent sequentially and 12 percent on-year to Rs 19,128 crore in the June quarter. To keep investors happy, the company's board has approved the issuance of one free share for every share held i.e. a 1:1 bonus issue.

Shares of Infosys on Friday rose by over two percent ahead of its June quarter results announcement. The IT major's stock settled at Rs 1,309.10, up 1.12 percent on the BSE. Intra-day, it gained 2.83 percent to Rs 1,331.35. The company announced its quarterly results after the market closed on Friday.

CEO speak

Commenting on the Q1 performance, TCS CEO and MD Rajesh Gopinathan said: “We are starting the new fiscal year on a strong note, with the growth engine firing on all cylinders. Our Banking vertical recovered very nicely this quarter, while other industry verticals maintained their momentum. With a good set of wins during the quarter, a robust deal pipeline and accelerating digital demand, we are positioned well for the future.”

Mr Gopinathan further added: “Customers across verticals and markets are embracing our Business 4.0 thought leadership framework and accelerating their digital transformation journeys. Our contextual knowledge, full spectrum capabilities and investments in research and innovation are making us their preferred partner for their growth and transformation initiatives.”

Infosys' CEO and MD Salil Parekh said in a statement,"The strong revenue and margin performance in this quarter shows that our dual emphasis on agile digital and AI (artificial intelligence) driven core services is resonating with our clients”.

He added that the company sees "good traction in the market".

Here are six charts that help decode the companies' performance:

On the rupee revenue front, both TCS and Infosys had reported record numbers at least in 17 quarters for which Firstpost has data. While TCS clocked a revenue of Rs 34,261 crore in the June quarter, that of Infosys was Rs 19,128 crore revenue.

In case of TCS, the revenue growth of 6.8 percent (QoQ) in the June quarter was the highest in the past 15 quarters while Infosys' revenue growth of 5.8 percent (QoQ) was the highest in the past 11 quarters.

The Tata group gem had a record Q1 net profit of Rs 7,340 crore at least in 17 quarters for which Firstpost has data. At Rs 3,612 crore, Infosys' was the lowest in the past four quarters.

While TCS' net profit growth of 6.3 percent was the highest in past three quarters, Infosys had a decline of 2.1 percent (QoQ) in the June quarter as against a 28.1 percent drop in the March quarter.

Both software firms logged a decline in operating profit margins for the June quarter. While TCS' margins fell by 40 basis points to 25 percent, that of Infosys reported a contraction of 100 basis points to 23.7 percent on a sequential basis. Commenting on the operating profit margin, TCS' chief financial officer V Ramakrishnan said though promotions and salary hikes shaved off 1.80 percent of the margins, currency gains of 0.70 percent cushioned the impact apart from a 70 bps improvement in operating efficiencies.

In the June quarter, TCS' employee attrition rate fell to a five-quarter low at 10.9 percent while Bangalore-based Infosys' attrition rate has risen to 23 percent - that was the highest in at least 17 quarters for which Firstpost has data. Commenting on the attrition rate, TCS' human resource head Ajoy Mukherjee said that as against negative growth in the same period last year, the company's net hiring rose by 5,800 to over four lakh owing to pick up in demand. The attrition decreased marginally to 10.9 percent, he added.

(With inputs from PTI)

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Updated Date: Jul 13, 2018 20:09:25 IST

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