IT Income Q4: IT majors Infosys and TCS left the road without posting their March-quarter results.
Both Infosys and TCS, which together account for 11 per cent smelly 50 index weighting, quarterly profit missed analysts’ estimates as companies reduced spending on technology to cool the economy after turmoil in the US banking sector.
Two of India’s largest software services companies saw a contraction in both revenue and margin during the March quarter. While TCS failed to live up to the expectations, Infosys pulled the plug.
Among the positives will be large deal wins for both companies and a sharp decline in attrition rates in Q4, however, broad-based performance looms large with uncertainty ahead.
On Wednesday, Infosys shares closed at Rs 1,388.60, down 2.79 per cent, on the BSE. TCS closed 1.61 per cent down at Rs 3189.85.
Here are the major highlights of the comparison between TCS, Infosys
Net Profit
TCS: TCS’s net profit rose to Rs 11,392 crore from January to March, up 14.8 per cent from the same period last year. Analysts have given an average estimate of Rs 11,530 crore.
Infosys: The company earned a net profit of Rs 6,128 crore, a growth of 7.8 per cent over the previous year. Analysts were expecting a profit of Rs 6,613 crore.
Income
TCS: Revenue from operations for the Mumbai-headquartered firm stood at Rs 59,160 crore, a year-on-year growth of 16.9 per cent.
Infosys: Revenue growth in constant currency for FY23 came in at 15.4 per cent, below guidance. Notably, during the December quarter earnings announcement, Infosys – which competes in the market with TCS, Wipro and other IT firms – raised FY23 revenue guidance to 16-16.5 per cent (against the earlier estimated band of 15-16 per cent). ) was increased to .
up and down figures
TCS: The company was able to register double digit growth in topline and bottom in Q4FY23. Both the top and bottom figures were lower than Street estimates. Its outgoing CEO Rajesh Gopinathan acknowledged that revenue growth of 0.6 per cent in the December quarter was “weaker than expected” due to a shock in North America.
Infosys: The company missed analysts’ estimates for both the bottomline and topline.
deal wins
TCS: Despite growing economic challenges, Mumbai-based TCS has won some big contracts in recent months, including a deal worth more than $700 million with an insurance service provider, the biggest in the UK in three years.
Its January-March order book stood at $10 billion, down 11.5 percent from a year ago, but with “an all-time high number of large deals”.
Infosys: Infosys’ big deal was $2.1 billion in total contract value in the three months to March.
Dividend
TCS: The board approved a final dividend of Rs 24 per equity share.
Infosys: The board has recommended a final dividend of Rs 17.50 per equity share for the financial year ending March 31, 2023.
headcount, attrition
TCS: During the March quarter, TCS reverted to its historic trend of becoming a net hirer, adding 821 employees to take the total headcount to 6.15 lakh people. Employee attrition, a key metric for IT companies, rose to 20.1 per cent from 15.3 per cent in the previous quarter.
Chief HR Officer Milind Lakkad said the company is maintaining the 40,000 freshers-hire target for FY24 and has already made 46,000 offers. Pay revision will be as usual, and top performers will get a hike of 12-15 per cent, he said.
Infosys: The March 2023 quarter saw a net reduction of 3,611 employees in Infosys’ head count as compared to the previous quarter, and the total workforce is expected to come down to 3,43,234 by March 31, 2023.
Infosys’ voluntary exits – a metric keenly watched by analysts – showed improvement, easing concerns. The attrition rate in the fourth quarter of FY2023 stood at 20.9 percent, compared to 24.3 percent in the third quarter.
So what went wrong with both companies?
Outgoing TCS CEO Rajesh Gopinathan said the sequential decline in the North America business took the company by surprise and the demand surge was not expected.
Gopinathan said the company was expecting constant currency revenue growth of 1.5-2 per cent during the quarter and ended with 0.6 per cent. He attributed the shortfall to a decline in North American business, especially in the US.
BFSI, which is TCS’ largest segment by revenue, grew 9.1 per cent in the quarter, as against 11.1 per cent during the same period last year.
Infosys MD and CEO Salil Parekh said the company saw an unplanned ramp down in some customers and reduced volumes due to delay in decision making.
He further said that the unplanned ramp down happened in the telecom, hi-tech and retail segments and within the financial segment, it came in asset management and investment banking businesses.
“In addition we had some one-time revenue impact. While we saw some signs of stabilization in March, the environment remains uncertain. This results in our fourth quarter constant currency growth of 8.8 percent and a quarter-on-quarter decline of 3.2 percent Is.
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