INSUBCONTINENT EXCLUSIVE:
ET Intelligence Group: The December 2019 quarter performance of the top information technology (IT) companies reveals that the impact of
slowing revenue from the banking, financial services and insurance (BFSI) segment is more prominent for Tata Consultancy Services (TCS)
compared with the peers, including Infosys and HCL Technologies
This is expected to shrink the valuation premium that the stock of TCS enjoys over peers in the near term.
Infosys and HCL Tech registered
better growth in the first nine months of FY20 despite weakness in verticals, including BFSI and retail.
The revenue of TCS, the country’s
largest software exporter, grew by 6.9 per cent year-on-year to $16,588 million during the period while Infosys posted 9.7 per cent growth
in the top line at $8,739 million
For HCL Tech, revenue shot up by 16.3 per cent to $7,392.6 million helped by revenue from acquired businesses
Wipro, the fourth largest IT company, reported the slowest growth of 1.1 per cent in revenue at $6,182.5 million.
Dwindling growth in
financial services and capital market segments in the major markets of the US and Europe has been a concern for Indian IT companies
The BFSI vertical contributed 30.9 per cent, 31.5 per cent, and 21.6 per cent to the revenue of TCS, Infosys, and HCL Tech, respectively
Given the management commentaries for the December quarter, the BFSI vertical is expected to show sluggishness in the near term.
This will
continue to impact TCS more since it generates over 46 per cent revenue from BFSI and retail, which grew in single digits at over 5 per cent
year-on-year in the December quarter
Hence, they dragged the overall growth even though verticals, including communications, life sciences and manufacturing, which together
contributed over 24 per cent to the top line, grew by more than 9 per cent each
For Infosys and HCL Tech, the faster growing verticals contributed more to the revenue than BFSI, thereby improving the overall revenue
growth.
TCS also reported an escalated employee attrition at 12.2 per cent in the December quarter compared with 11.6 per cent in the
While its headcount dropped by 4,063 sequentially to 4.5 lakh employees, the management attributed this to the uneven hiring trend for the
current fiscal wherein the first two quarters reported higher recruitment.
