TCS vs Infosys: How IT heavyweights will fare on key parameters

For the first time, Tata Consultancy Services (TCS) and Infosys will announce their quarterly results on the same day. Both the IT companies are scheduled to release their fourth quarter results of the financial year 2018-19 (Q4FY19) on Friday (April 12). 

Overall, IT companies are expected to deliver steady numbers, owing to ramp-up in deal wins and healthy digital growth. However, rupee appreciation, onsite talent crunch, and employee reskilling are expected to keep margins under pressure.

The top five IT players – Tata Consultancy Services (TCS), Infosys, Wipro, HCL Technologies and Tech Mahindra – are expected to clock 2–3.1 per cent QoQ growth in constant currency (cc) during the quarter under review.

Here's a look at how the two IT heavyweights are expected to fare on key parameters -

REVENUE

Infosys: Most analysts expect the company to post 1.7 to 2 per cent quarter-on-quarter (QoQ) growth in revenue in the constant currency (cc) terms, mainly aided by cross-currency tailwinds. Nirmal Bang Securities expects the figure to come in at Rs 21,531.4 crore.

TCS: Healthy deal signings and growth in digital services are expected to result in constant currency revenues growth of 1.8 per cent QoQ, say analysts at ICICI Direct. Edelweiss Securities and Nirmal Bang Securities see the revenue growth of 2 per cent at Rs 37,828.3 crore.   

EBITDA MARGIN

Infosys: EBITDA (earnings before interest, tax, depreciation and amortization) margin may fall up to 78 basis points (bps) to 24.5 per cent.

TCS: EBITDA margin is expected to dip to nearly 27 per cent, pushed down by rupee appreciation (40bps). Centrum Broking Wealth sees a decline of 46 bps on QoQ basis to 26.5 per cent.

EBIT MARGIN

Infosys: EBIT margins may decline 30 bps QoQ to 22.3 per cent primarily owing to rupee headwind, transition costs, wage revision for some employees partly offset by reversal of one-time impact of 40 bps, due to Panaya and Skava deals, says ICICI Direct results preview note.

TCS: EBIT (earnings before interest and tax) margins could decline 20 bps QoQ to 25.4 per cent mainly on account of rupee appreciation, which will be partially offset by operational efficiency. 

PAT

Infosys: The Salil Parekh-led IT company is expected to report net profit or profit after tax (PAT) growth of up to 14 per cent. While Nirmal Bang Securities sees the figure at Rs 3,938 crore, up 9 per cent QoQ, analysts at Edelweiss Securities expect a growth of 14 per cent to Rs 4,113.5 crore.

TCS: TCS may report a flat to marginal decline in its net profit for the quarter under review. Centrum Broking sees a 3.6 per cent QoQ decline in its net profit at Rs 7,811.7 crore.

GUIDANCE

Infosys: It is expected to guide for 8 per cent-10 per cent CC growth guidance for FY20 with the margin guidance band being lowered by 100 bps on YoY basis to 21 per cent-23 per cent. Infosys had later upped this guidance to 8.5-9 per cent post Q3FY19 results. "It has announced a slew of deals over the past few months and hence we expect continued confidence in revenue momentum," say analysts at Centrum Broking.

TCS: Nirmal Bang Securities says a definite answer on the growth guidance for the financial year (FY) 2020 will be given by the company only by 1HFY20 and not at the beginning, unless it has an outstanding TCV (total contract value) quarter in 4QFY19.

At the bourses, TCS and Infosys have outperformed the benchmark S&P BSE Sensex in the last one year as they have gained over 39 per cent and 35 per cent, respectively. The S&P BSE Sensex, on the other hand, has risen nearly 14 per cent during the period while the S&P BSE IT index has surged over 28 per cent, ACE Equity data show.