From Strength to Strength: Exploring the Financial Prowess of Tata Consultancy Services and Infosys

When it comes to discussing the Indian IT sector, two prominent names repeatedly emerge those are Tata Consultancy Services Ltd (TCS) and Infosys Ltd. These companies not only dominate the market capitalization charts but also boast remarkable financial records over the past decade. As leading IT giants in India, they have played a pivotal role in shaping the country’s IT landscape and have garnered international recognition for their achievements.

Tata Consultancy Services, founded in 1968, is a global leader in IT services, consulting, and business solutions. It offers a comprehensive range of services, including application development and maintenance, infrastructure services, business process outsourcing, and digital transformation solutions.

Infosys, established in 1981, is a prominent player in the IT industry, Infosys offers a wide range of services, including software development, maintenance and support, system integration, cloud computing, cybersecurity, and data analytics. The company serves clients across various sectors, such as banking and financial services, retail, healthcare, manufacturing, and telecommunications,

In this article, we are comparing both of these IT giants.

Comparing the data provided, TCS shares are currently trading at Rs 3318 in the Indian Markets, which is approximately 2.5 times the price of Infosys shares trading at Rs 1343. When considering the Price to earnings ratio, TCS is trading at around 30 times, while Infosys is valued at only 23 times.

Examining the top-line performance in FY23, TCS witnessed revenue growth of 17.58% from Rs 191754 Crore to Rs 225458 Crore. Additionally, TCS has shown a compounded annual growth rate of 13% over the past three years. On the other hand, Infosys experienced a revenue surge of 20.66% from Rs 121641 Crore to Rs 146767 Crore, with a CAGR of 17% in the last three years, surpassing TCS’s growth rate.

Both companies maintain double-digit operating margins, with TCS at 26% and Infosys at 24%. Regarding net profit and its growth, TCS recorded a net profit of Rs 42303 Crore, with a compounded annual growth rate of 9% over the past three years. In comparison, Infosys achieved a net profit that is nearly half of TCS’s, approximately Rs 24108 Crore, although their profit grew by 13% in the last three years.

When considering the earnings per share (EPS) in FY23 and its growth, TCS experienced a 10% increase in EPS from Rs 104.75 to Rs 115.19. On the other hand, Infosys achieved a growth of 10.5% in EPS, rising from Rs 52.56 to Rs 58.08 in FY23. It can be clearly observed that TCS’s EPS is nearly double that of Infosys.

However, when it comes to dividend yield, Infosys offers a higher yield compared to TCS. In terms of the price-to-book value ratio, TCS is currently trading at a PB of 13.7 times, which is approximately double that of Infosys, trading at 7.4 times.

Considering the attrition rate, which is an important parameter in the IT industry, TCS experienced an attrition rate of 20.1% in FY23, while Infosys had an attrition rate of 20.9%.

If we compare the total contract value (TCV) of both companies, TCS has secured contracts with a TCV of USD 34.1 Billion, while Infosys has achieved a TCV of USD 9.8 Billion.

When considering the client base of both companies mentioned in the above table, TCS, being the largest IT giant, has a client base of approximately 1.5 times larger than that of Infosys across all categories.

While the overall performance of IT shares has not been performed in recent years, let’s compare the stock performance of both companies. In the last three months, TCS has generated a modest return of 3%, and over the past year, it has generated a return of 3.33%. Moreover, TCS’s stock has delivered a decent return of 51% over the last three years.

In contrast, Infosys has experienced a negative return of 5.22% in the last three months, as well as a negative return of 8.6% over the past year. Impressively, Infosys’s stock has delivered a substantial return of 76.9% over the last three years.

Tata Consultancy Services Ltd and Infosys Ltd have firmly established themselves as the cornerstones of the Indian IT sector. Their remarkable financial records, unparalleled market capitalization, and consistent growth reflect their resilience, expertise, and customer-centric approach. With their strong financial foundations, extensive client base, and global reach, TCS and Infosys are well-positioned to lead the Indian IT sector into a future marked by technological advancements and digital transformation.

As the June quarter ends, both TCS and Infosys are on the verge of announcing their earnings reports for Q1 FY24. Investors eagerly await these reports to gain a better understanding of the company’s performance and make informed investment decisions.

While awaiting the results, it is also essential for investors to closely monitor the movement of stock prices, allowing them to observe and analyse the trends exhibited by these stocks.