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Home » , , » TCS beats Infosys to become most profitable IT company

TCS beats Infosys to become most profitable IT company

Posted by 1stnews9 ~ on Sunday, 21 October 2012 ~ 0 comments

TCS has reported more than just good quarterly results on Friday, delivering a tad higher operating margin than Infosys to become the most profitable company among the top-tier Indian IT firms and breaking the hegemony of Infosys.

Though it may not be prudent to conclude on the basis of the numbers of a single quarter whether TCS will be able to retain its lead over Infosys, the results may stoke some concern among investors who have long adored Infosys for its claim of better revenue quality.

Even as the profitability for the remainder of the fiscal will depend on the currency movement, among other factors, TCS expects to clock 27% margin for 2012-13. Infosys, on the other hand, has guided for a 200 basis-point contraction in its operating profitability for the current fiscal, after reporting an over 29% margin in 2011-12.

TCS has reported 26.8% operating margin for the quarter to September, 50 basis points higher than that of Infosys. This is the first time that the company has clocked such a higher profitability than Infosys. Moreover, the contraction of 166 basis points in Infosys' margin on a sequential basis was way higher than the drop of 80 basis points in TCS' profitability.

What should also cause concern is the sustained difference over the past few quarters in the outlook between that of Infosys and its peers TCS and HCL Tech. While the latter two players have reiterated that they will surpass the industry body Nasscom's average revenue growth of 11-14% for the current fiscal, Infosys expects growth to be at least 5% for the year.

Infosys is expected to revise its estimates for the entire fiscal marginally upwards in the December quarter after it starts the integration of the newly-acquired business of Lodestone. Based on the performance and management commentaries on the demand scenario, TCS and HCL Technologies appear to be better placed to tackle the headwinds of delay in decision-making and slowing expenditure on projects.

In terms of client additions in the July-September quarter, TCS fared better than its peers, clocking 41 new clients, higher than 29 in the June quarter. In contrast, Infosys' client addition slowed down to 39, the lowest in past five quarters.

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