India’s IT services industry is one of the largest contributors to the economy.
Even in the stock markets, IT stocks are the key drivers this year. The BSE IT index has gained 47% year to date, predominantly led by the big four IT companies – TCS, Infosys, HCL Tech and Wipro.
They are also one of the biggest employers in the country.
For this reason that the performance of the companies is important to the markets and the economy. All four companies have reported financial results for the July-September quarter.
Here are the key positive and negative takeaways from the earnings of TCS, Infosys, HCL and Wipro:
1) Tata Consultancy Services:
Dollar revenue growth: 5.4%
Rupee revenue growth: 16.6%
Profit growth: 20.6%
Guidance: Above industry average of 12-14%
Good: It is not for nothing that TCS is valued higher than its rivals.It has delivered the best set of numbers on almost all aspects – profits, operating margins, volume growth and client additions. Its purchased of Alti, a French company, pushed TCS’ volume growth to the highest in nine quarters. The No. 1 Indian IT exporter’s operating margin – the efficiency in generating revenue – is also the highest among peers.
Bad: While the company’s results are very good, the only point of concern is the appreciation of the rupee to 60-to-a-dollar levels from Rs 68/$. Since the IT industry earns in foreign currencies, a depreciation in the rupee is advantageous. Moreover, the valuation of the stock is quite high. It has soared nearly 60% this year alone. So the rise in share price could be moderate in the near term.
2) Infosys:
Dollar revenue growth: 3.8%
Rupee revenue growth: 15.1%
Profit growth: 1.4%
Guidance: 9-10%
Good: Infosys crossed the $2 billion mark in quarterly sales for the first time. It posted a significant jump in revenues, profits, and utilisation – a measure of the efficiency of employees – after underperforming the last few quarters. It also increased the lower end of its guidance for growth to 9% from 6% earlier. This reflects its optimism for the future.
Bad: The IT services exporter reported a drop in operating margins due to salary hikes. It also saw a rise in attrition to the highest in two years at 17.3%. Attrition shows how many employees are leaving the company. Many analysts also remain wary about Infosys’ conservative guidance, which is below the average of 12-14% as estimated by Nasscom, the IT industry body.
3) HCL Technologies:
Dollar revenue growth: 3.5%
Rupee revenue growth: 14%
Profit growth: 18.7%
Guidance: Above industry average
Good: The growth in revenues in the September quarter reflects the improvement in the IT business environment. Also, the net profit and operating margins broadly exceeded analyst estimates. HCL Tech also added 11 clients in the quarter, mostly in the $20 million bracket. This is good news for the IT company as it means increase in productivity.
Bad: However, the revenue growth was slower than Infosys and TCS. This was a key reason why shares fell over 2.5% after the earnings announcement. Analysts also fear HCL Tech’s dependence on a single vertical – infrastructure services, which accounted for one third of its revenues. In contrast, contribution of software application services – the key product of India’s IT businesses – to the company’s revenue dropped to 45.7% from 50.8% earlier.
4) Wipro:
Dollar revenue growth: 2.7%
Rupee revenue growth: 12.9%
Profit growth: 19%
Guidance: 1.8-3.6%
Good: Wipro’s September quarter growth is the fastest in two years. It also appears bullish about the future due to increased spending
in the US and higher deal wins. Most of the analysts have upgraded their outlook for the stock after the earnings, reflecting increasing optimism for India’s third largest IT services exporter.
Bad: The IT company reported a good set of figures for the September quarter. However, the numbers are not good in comparison with other large-cap IT companies. It also grew slower than HCL Tech, which is smaller than Wipro. Another key dampener was on the human resources front, which saw no net addition in employees for the quarter. Attrition too rose to 15.4% from 13% in the previous quarter.
Judul : TCS, HCL, Wipro or Infy: Who did better in Q2?
Deskripsi : India’s IT services industry is one of the largest contributors to the economy. Even in the stock markets, IT stocks are the key drivers th...