These factors and a sustained deal flow hint at a higher business momentum in the coming financial year. Infosys stock has gained twice as much the large peer Tata Consultancy Services (TCS) in the past 12 months; the former is likely to maintain the lead in the medium term given a greater business traction.
So far, the top three IT exporters from India including TCS, Infosys, and HCL Technologies (HCLTech) based on annual revenue, have declared numbers for the third quarter. While the effect of the seasonal weakness on their top lines has been varied, each of them reported a sequential improvement in the operating margin (EBIT margin), buoyant deal wins backed by a gradual recovery in discretionary projects and increased employee attrition rate.
A look at the trailing 12 months (TTM) data shows that HCLTech has been leading the pack in terms of year-on-year growth in the dollar denominated revenue. It has retained TTM the top line growth above 5% in each of the quarters since June 2021. For the other two companies, growth has remained below 5% in each of the past five quarters. Given this, HCLTech is expected to clock the fastest growth among the top tier IT companies for FY25. In the TTM to December 2024, TCS, Infosys and HCLTech reported year-on-year revenue growth of 45, 3%, and 5.3% respectively.
For Infosys, Europe showed traction in the BFSI segment in the December quarter following the US which had reported an uptick in the previous quarter. The latter market reported buoyancy in the retail segment. The company is in the process of developing over 100 agents on the artificial intelligence (AI) platform for clients, which has supported the business momentum.
The company added 5,591 net employees sequentially to take the total headcount to 3,23,379 at the end of December. On the year-on-year basis, it added 716 employees, a first quarter of net additions after a gap of five quarters. The attrition rate increased to 13.7% from 12.9% sequentially. Revenue for the quarter grew by 0.9% to $4,939 million compared with the analysts’ average forecast of 0.4% drop. The operating margin improved by 20 basis points to 21.3% aided by currency movement and operating efficiency. Net profit rose by 4.6% sequentially to Rs6,806 crore.The total contract value (TCV) was $2.5 billion, similar to $2.4 billion in the prior quarter. While it was lower than $3.2 billion of TCV clocked in the year-ago quarter, the deal flow is likely to improve in subsequent quarters given the gradual momentum in the discretionary spend. Infosys raised the revenue growth guidance to 4.5-5% for FY25 from earlier guidance of 3.75-4.5% growth. This was better than the expectation of 4-4.5% growth guidance. Over the past 12 months, Infosys has gained 17.5% on the BSE compared with 8.3% and 13.7% returns posted by TCS and HCLTech. It is expected to retain the lead amid brighter prospects.
