Clash of results for IT majors-TCS, Infosys

It is an interesting day ahead for the business world as the country’s largest IT services provider TCS and second largest IT services firm Infosys would be announcing the annual results on Friday.

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The two IT major would be announcing the results for the first time on the same date, as Mumbai based TCS has deferred its results this time around. Historically, TCS used to announce results ahead of second-placed Infosys.

DH brings to you key things to look out for in each company’s results:

TCS:

Outlook and visibility for double-digit growth: In the first three quarters of the current financial year, the IT major has shown double-digit growth in the revenues. However, in Q4, it is expected to clock higher single-digit growth as it is seasonally weak quarter compared with 3Q. Most pockets for TCS are doing well, with the exception of Automotives and Hi-Tech.

Outlook, in the build-up to the global slowdown, is an interesting thing to watch for the company.

Commentary on BFSI: Banking and Financial Services Institution (BFSI) – a key vertical for all the Indian tier 1 IT companies, turnaround drove TCS’ robust start to FY19. Its vertical growth accelerated by 4.1% year on year Y-on-Y during Q1 of FY19 – propelling the IT major back to the double-digit growth.

Trajectory of margins: Despite 1.3% Quarter on Quarter (Q-on-Q) appreciation of the INR, EBIT margin estimate of 25.8% is 20 basis points higher Q-on-Q as pressure from escalated sub-contractors has abated for TCS.

Infosys:

Guidance on revenues and margins: Infosys witnessed it operating margin level reaching to a 10-quarter low in the quarter ended December 2018. It would be interesting to note how Infy sees at their margins going forward in the current financial year. Advisories expect the company to guide for 7-9% CC revenues for FY20 and 21-23% EBIT margin band (100bp lower).

Deal wins: Past few quarters have been very strong for Infosys in terms of deal wins – with the company achieving $2 billion quarterly deal wins in the second quarter and $1 billion deal wins in the first quarter. It would be interesting to see what the company has in store in terms of deal wins.

Attrition level: Attrition has been a major issue with Infosys. After reaching an alarming level of around 21% in the second quarter of the by-gone financial year, it was able to pull it back in lieu of better employee incentives. But given that, historically, we have seen higher attrition rates in the 4th quarter, we might end up seeing higher attrition in the quarter again.