Comprehensive Comparative Analysis of Top 5 IT firms

This write up primarily covers the Financial, Non-Financial and qualitative analysis of the Top 5 Indian firms. This includes data like Active clients, Per capita client revenue, RPP, Service Line split, Industry Split, Geo Split, Utilization, Attrition, Revenue Efficiency and much more. The financial parameters (revenue, operating margins, net profits and other trends) analysis based on P&L is included as an appendix for easy reference

The key qualitative highlights during the comparative analysis of Top 5 Indian IT firms are as follows:

1.       TCS is 45% bigger than its nearest rival Infosys in terms of revenues for the year FY12. CTS is catching up with Infosys rapidly and its revenues were 92% of Infosys revenues in FY12

2.       TCS is however 59% bigger than Infosys in terms of the closing total head count in FY12 and CTS headcount was 87% of Infosys headcount. This means that CTS is the most efficient of the three firms in terms of resource productivity

3.       TCS (1047) has highest number of active clients followed by Wipro (943), CTS(805), Infosys(694) and HCL(516). This means that the per capita revenue per client is highest for Infosys followed by TCS, CTS, HCL and Wipro in that order.

4.       The RPP data is not available for TCS and CTS. Among the rest the rankings are: Wipro ($9008), HCL($8804) and Infosys ($6268) in that order

5.       Since the RPP data which is based on billable person months is not available for all the firms, I have used a simple measure of Total Revenues/Total Employees as a surrogate measure of “Resource Efficiency”.  According to this measure CTS ranks first, followed by HCL, Infosys, Wipro and TCS in that order

6.       The utilization data including trainees is the highest for HCL(75%), followed by TCS(71%), Wipro(68%) and Infosys(67%) in that order. This data is not available for CTS. However the CTS offshore utilization including trainees is itself 67% and typically it has 90-95% utilization at onsite; this might mean that CTS might actually be near the top of the charts in terms of utilization

7.       The Geo Split of revenues in North America for TCS, Wipro and HCL hovers around 52-57% of their total revenues. Similarly the Europe revenue for these firms hovers around 25-28%.  CTS has 80% of its revenues coming from the North American market.

8.       The ranking of industry units in Indian firms based on the vertical revenues for Q4, FY12 is given below.

o   In terms of absolute revenues, the BFSI unit in TCS is the largest amongst the Indian IT firms, followed by that in CTS and Infosys in that order.  

o   The Manufacturing unit at Infosys is the largest amongst the Indian IT firms, followed by TCS and HCL in that order.

o   The Telecom vertical is largest in TCS amongst the Indian firms followed by that of Wipro and Infosys.

o   The Energy & Utilities vertical at Wipro is the largest amongst the Indian firms followed by those at Infosys and TCS

o   The Retail vertical is largest at TCS followed by those at Infosys and Wipro

9.       The service line split analysis has been done and the following are the observations:

o   The proportion of ADM business in the total business is largest for TCS (44%) followed by Infosys (40.5%) and HCL (31%)

o   The proportion of the CSI business is largest at Wipro(37%) followed by Infosys (31%)

o   The Testing business as proportion of the total business is almost same at Infosys and TCS and hovers around 7.5%. Other firms do not report the testing business separately

o   The IMS business as proportion of the total business is the largest for HCL(24%) followed by Wipro(22%), TCS(10%) and Infosys(6%)

10.       Finally coming to the attrition numbers, CTS(10.5%) tops the chart for low attrition followed by TCS(12.2%), HCL(14.4%), Infosys(14.7%) and Wipro(17.5%) in that order.

Financial Analysis for year ending FY12 and quarter ending Q4, FY12

A.      Quarterly Performance ( Q4, FY12 / JFM Quarter, 2012)

1. CTS leads in terms of QoQ Revenue growth at 2.9%, with TCS and HCL following at 2.4% and Infosys trailing at -1.9%

2. CTS leads in YoY Revenue growth at 24.8% with TCS following at 18% and Infosys trailing at 10.5%

3. CTS  leads in terms of QoQ Operating Profits growth at 2.9% with Wipro following at 1.5% and Infosys trailing at -5.7%

4. HCL leads in terms of YoY Operating Profits growth at 25.2% with CTS following at 19.6%, TCS at 15.3% and Infosys trailing at 13.8%

5. Infosys leads in terms of Operating Profits as a % of revenues at 29.8% with TCS closely following at 27.7% and CTS and HCL trailing at 18.5% and 15.7% respectively

Parameter	Infosys	TCS	HCL	CTS	Wipro
Q4 Revenues(M USD)	1771	2648	1047	1711	1535.6
QoQ Growth	-1.9%	2.4%	2.4%	2.9%	2.0%
YoY Growth	10.5%	18.0%	14.6%	24.8%	9.7%
Q4 Operating Profits(M USD)	528	733	164	317	318
QoQ Growth	-5.7%	-3.0%	1.2%	2.9%	1.5%
YoY Growth	13.8%	15.3%	25.2%	19.6%	2.7%
As % of Revenues	29.8%	27.7%	15.7%	18.5%	20.7%
Q4 Net Profits(M USD)	463	585	121	243	NA
QoQ Growth	1.1%	3.0%	8.0%	1.3%	NA
YoY Growth	15.2%	10.6%	17.5%	16.8%	NA
As % of Revenues	26.1%	22.1%	11.6%	14.2%	NA

B.      FY12 / Last 12 months ending 31’st March Annual Performance

1. Infosys has shown a YoY growth of 15.8% in revenues and 13.2% in Operating Profits. Its Operating Profit as a % of revenue is 28.8%

2. CTS has shown a YoY growth of 29.1% in revenues and 26% in Operating Profits. Its Operating Profit as a % of revenue is 18.4%

3. TCS has shown a YoY growth of 24.2% in revenues and 22.1% in Operating Profits. Its Operating Profit as a % of revenue is 27.6%

4. HCL has shown a YoY growth of 21.5% in revenues and 33.8% in Operating Profits. Its Operating Profit as a % of revenue is 15.3%

5. Wipro has shown a YoY growth of 13.4% in revenues and 3.9% in Operating Profits. Its Operating Profit as a % of revenue is 20.8%

Parameter	Infosys	TCS	HCL	CTS	Wipro
FY12 Revenues(M USD)	6994	10170	4035	6461	5921
YoY Growth	15.8%	24.2%	21.5%	29.1%	13.4%
FY12 Operating Profits(M USD)	2013	2805	618	1188	1232
YoY Growth	13.2%	22.1%	33.8%	26%	3.9%
As % of Revenues	28.8%	27.6%	15.3%	18.4%	20.8%
FY12 Net Profits(M USD)	1716	2236	454	918	NA
YoY Growth	14.5%	15.3%	34.3%	16.2%	NA
As % of Revenues	24.5%	22.0%	11.3%	14.2%	NA