TCS vs Infosys: While Tata's gem dazzled in net profit, Bengaluru firm did well on revenue front; Q1 analysis in 6 charts

Software giants Tata Consultancy Services (TCS) and Infosys have published their June quarter earnings in the last week. In the June quarter, on net profit front both IT majors have beat analysts’ estimates while on the operating profit margin front, there were some disappointments. The country’s largest software services firm TCS reported a 10.8 percent year-on-year (YoY) and 0.1 percent quarter-on-quarter (QoQ) growth in consolidated net profit at Rs 8,131 crore for the quarter. Revenue of the Mumbai-based firm grew 11.4 percent YoY and 0.4 percent QoQ in the quarter under review to Rs 38,172 crore. Managing director and chief executive Rajesh Gopinathan of TCS said in FY18 revenue growth had slipped to below 10 percent, which recovered to double-digits in FY19 and said he is not looking at a faster pace of topline growth. “I am really not looking for acceleration, but looking for sustaining the double-digit growth level going forward,” he told reporters announcing the numbers. [caption id=“attachment_5880291” align=“alignleft” width=“380”] File photos of TCS CEO Rajesh Gopinathan and Infosys CEO Salil Parekh. Agencies[/caption] Meanwhile, the country’s second-largest IT firm Infosys reported 5.3 percent YoY growth and 6.8 percent QoQ decline in the consolidated net profit at Rs 3,802 crore for the June 2019 quarter. Revenues of the Bengaluru-based firm grew 14 percent YoY and 1.2 percent QoQ to Rs 21,803 crore in the quarter under review. Infosys secured $2.7 billion—its highest-ever in a quarter—in large deals, mostly in dominant North American and European markets. The company has raised its revenue growth guidance for the fiscal to 31 March 2020 to be between 8.5 percent and 10 percent, from the 7.5 percent to 9.5 percent range it had forecast earlier. Commenting on the results, Infosys CEO and Managing Director Salil Parekh said, “We had a strong start to FY'20 with constant currency growth accelerating to 12.4 percent on year over year basis and digital revenue growth of 41.9 percent. This was achieved through our consistent client focus and investments which have strengthened our client relationships”. Attributing the performance to a “broad-based growth”, Parekh added that the company has consequently raised the revenue guidance for this fiscal from 7.5-9.5 percent to 8.5-10 percent in constant currency terms. Here are six charts that help decode Infosys and TCS’ performance: On the rupee revenue front, both TCS and Infosys had reported record numbers at least in 21 quarters. While TCS clocked a revenue of Rs 38,172 crore in the June quarter, that of Infosys was Rs 21,803 crore. In the case of TCS, the revenue growth of 0.4 percent (QoQ) in the June quarter was the lowest in the past eight quarters while Infosys’ revenue growth of 1.2 percent (QoQ) was the highest in the past two quarters. The Tata group’s gem had a record Q1 net profit of Rs 8,131 crore at least in 21 quarters. At Rs 3,802 crore, Infosys’ net profit was the lowest in the past two quarters. While TCS’ net profit growth of 0.1 percent (QoQ) was the lowest in the past eight quarters, Infosys had a decline of 6.8 percent (QoQ) in its net profit in the June quarter, the lowest in the past two quarters. TCS’ operating margins dipped 90 bps to 24.2 percent sequentially, the lowest in the past eight quarters impacted by the rupee gains and the higher wage bills. Infosys’ operating profit margins fell 100 bps to 20.5 percent in June quarter, the lowest in at least 21 quarters. The company expects to maintain the FY20 operating margin range of 21-23 percent. In the June quarter, TCS’ employee attrition rate has risen to a five-quarter high at 11.5 percent, which the company attributed it to seasonal factors like implementation of wage hikes. Bangalore-based Infosys’ attrition rate rose to 23.4 percent, which was the highest in at least 21 quarters. The company said there was no impact of attrition on its deliverables and that historically, the first quarter of the fiscal has a higher level of attrition. --With PTI inputs