Comparative Analysis of Infosys, TCS, Wipro and HCL

It’s time to take a look at the comparative analysis of the leading Indian players now that 4 out of the 5 Top Indian firms have come out with their results for the quarter ending June 30, 2012.

On the whole it was not a great quarter for the Indian firms and the impacts of the weak US economy, fragile Euro Zone, decelerating emerging markets as well as the currency fluctuations seem to have had a fairly deep impact on the performance of the Indian firms. As always, I am looking at the quarterly results in USD as per GAAP norms as this is the only way we can get to compare ‘apples to apples’. The revenue growth QoQ for most Indian firms was below par and ranged from 0.6% for TCS to -1.4% for Wipro and -1.1% for Infosys. HCL has however managed to however defy gravity on the back of its large infrastructure deals and managed to grow by 3.1% sequentially QoQ in dollar terms which puts it in a different league altogether in terms of revenue growth.

The biggest question for this quarter still remains whether Cognizant will overtake Infosys and take over the coveted position of the No. 2 player in the Indian IT industry. Cognizant had given a guidance of “atleast” 1790 M USD for quarter ending June 30, 2012 (which is 4.6% growth QoQ in dollar terms). The company has not revised this guidance in the middle of the quarter. It remains to be seen if CTS can really grow by 4%+ when most of its competitors (barring HCL) could not cross even the 1% growth barrier. However since Infosys made 1752 M USD in Q1, CTS might be able to overtake Infosys even it manages to grow by 2.4% QoQ.

The summary of the Q1 performance as per USD GAAP norms for Infosys, TCS, Wipro and HCL is as follows:

1.       HCL leads in terms of QoQ Revenue growth at 3.1%, with TCS following at 0.6%,  Infosys at -1.1% and Wipro trailing at -1.4%

2.       HCL leads in YoY Revenue growth at 12.2% with TCS following at 10.5%, Wipro at 7.6% and Infosys trailing at 4.8%

3.       HCL  leads in terms of QoQ Operating Profits growth at 27.4% with TCS following at 2.3%, Wipro at 0% and Infosys trailing at -7.4%

4.       HCL leads in terms of YoY Operating Profits growth at 40.3% with TCS following at 18.9%, Infosys at 12.4% and Wipro trailing at 2.2%

5.       TCS leads in terms of Operating Profits as a % of revenues at 28.2% with Infosys closely following at 27.9%,Wipro at 21% and CTS and HCL trailing at 19.4%

6.       TCS leads in terms of SG&A expenses as a % of revenues at 19% with HCL following at 13.2% and Infosys trailing at 11.6%

Parameter	Infosys	TCS	Wipro	HCL
Q1 Revenues(M USD)	1752	2664	1514	1079
QoQ Growth	-1.1%	0.6%	-1.4%	3.1%
YoY Growth	4.8%	10.5%	7.6%	12.2%
Q1 Operating Profits(M USD)	489	750	318	209
QoQ Growth	-7.4%	2.3%	0.0%	27.4%
YoY Growth	12.4%	18.9%	2.2%	40.3%
As % of Revenues	27.9%	28.2%	21.0%	19.4%
Q1 Net Profits(M USD)	416	610	NA*	155
QoQ Growth	-10.2%	4.3%	NA*	28.1%
YoY Growth	8.3%	13.4%	NA*	36.0%
As % of Revenues	23.7%	22.9%	NA*	14.4%
SG&A Expenses	204	507	NA*	142
As % of Revenues	11.6%	19.0%	NA*	13.2%

*Wipro does not give P&L for Global IT services separately. There is a single P&L for Wipro Limited