Press "Enter" to skip to content

Infosys steals a march over TCS in Q2 revenue growth

Bengaluru: Infosys beat expectations with a boost in profits while snagging a record $2.8 billion in large deals in the second quarter of the financial year as it outperformed larger rival Tata Consultancy Services in revenue growth, setting the stage for double-digit expansion for India’s second-largest software exporter and once industry bellwether.

The Bengaluru-based company said it expects revenue growth in FY20 to be between 9 per cent and 10 per cent aided by strong business from the US market in the second quarter. Its revenue grew 3.3 per cent sequentially, double that of TCS’ 1.6 per cent.

Operating margin expands 120 bps

“Six of our large seven segments are all showing double-digit growth,” said Salil Parekh, chief executive officer, Infosys. “The deal pipeline remains strong and that continues to give confidence,” he said, while addressing media at the company headquarters on Friday.

“We see good demand and extremely strong environment in energy and utilities. In general, there is (volatility) that the financial services companies are looking at but now there is enough demand,” he said.

For the second quarter, Infosys’ revenue grew 3.3 per cent quarter-on-quarter in constant currency terms to $3.21 billion, marginally missing street expectations. Net profits grew 6.2 per cent sequentially to $572 million. In rupee terms, Infosys reported drop in net profits by 1.8 per cent to ?4,037croreover thecorresponding quarter last year while revenue grew10 per cent to ?22,649 crore.

The company’s operating margin expanded 120 basis points to 21.7 per cent, returning to its targeted band of 21-23 per cent.

In contrast, TCS’ margin slipped to 24 per cent in the quarter to September, under its targeted band of 26-28 per cent. The Tata Group company has attributed softened numbers to lower growth in its North American business and a dip in revenue from banking and financial services.

Infosys, however, said there is a volatility in the European capital markets and in some manufacturing activity.

TCS and Infosys’ showing in the retail services business has flagged concerns among analysts. While TCS’ retail revenue grew 4.8 per cent year-on-year, for Infosys the growth was just 1.1 per cent. The sector contributes about 15 per cent to both the companies’ annual revenues.

“Except retail, most of the key verticals (for Infosys) reported double-digit growth during the quarter,” Sanjeev Hota, head of research at Sharekhan by BNP Paribas, said.

He also said the company’s strong showing on the Ebit margin “has beaten our estimates and returned to its margin guidance band (after) weak margin performance in Q1.”

Infosys chief operating officer Pravin Rao said the volatility in retail would continue until macroeconomic conditions improve.

Analysts, however, were disappointed by Infosys’ decision to leave the top end of its revenue guidance unchanged.

Source: Economic Times