INSUBCONTINENT EXCLUSIVE:
ET Intelligence Group: The June 2018 quarter results of Infosys reflect that the investors waiting for the company to perform as good, if
not better, than its largest peer Tata Consultancy Services (TCS) may have to wait a little longer
It also lagged on the fronts of employee attrition and growth in the banking, financial services, and insurance (BFSI) vertical.
The
dollar-denominated sequential revenue growth of 2.3% after excluding currency effect, or in constant currency (CC), was much lower than the
4.1% growth reported by TCS
This is despite the fact that Q1 has historically been a strong quarter for software vendors as majority of clients finalise their annual
software budgets in the March quarter
On the basis of reported currency, too, Infosys grew at a slower pace of 0.9% than the 1.6% growth for TCS.
The growth momentum of Infosys
has slowed relative to TCS
The year-on-year growth in trailing 12-month (TTM) revenue of Infosys in each of the four quarters up to the June 2018 quarter has lagged
TCS after leading in the previous five quarters.
In addition, Infosys failed to show improvement in revenue from the BFSI vertical unlike
TCS, which reported a 3.7% sequential growth.
BFSI is a major segment contributing over one-third to the revenue of each of them
These factors may be a cause for concern as regaining the lost edge will be tough for Infosys amid intense competition.
To add to its woes,
employee attrition at Infosys increased by 400 basis points (bps) to 20.6%, whereas it reduced by10 basis points to 10.9% for TCS from the
It continued to retain guidance of 6-8% revenue growth for FY19 while retaining the operating margin band of 22-24%.
The momentum in revenue
from the digital solutions was also intact though not as fast as that of TCS
For Infosys, it grew by 25% year-on-year, while TCS reported a 45% growth.
In the near term, the stock performance of TCS is likely to
overshadow Infosys given the difference in their growth trajectories
But, the stock of Infosys may find some support due to the announcement of one bonus share for each existing paid up share.
