Beating TCS is found to be difficult for Infosys in this growth year

One of the most prominent IT company, Infosys showed stronger momentum for December quarter in terms of dollar-denominated revenue than the larger peer Tata Consultancy Services(TCS) in reported as well as constant currency (CC) terms. Though the operating margin fell down significantly by 110 basis points to 22.6% with respect to the adjustments related to the fair values of Panaya and Skava which are the two divisions that Infosys is in the process of selling. Regardless of the better sales friction, investors are waiting for the company to report a better topline growth in the present fiscal than TCS may need to wait.

In the previous quarters Infosys has given the slower growth rate when compared with TCS, now Infosys may find it difficult to overtake the closing in growth momentum for FY19. So for the third consecutive fiscal TCS may accordingly post better full-year revenue growth in terms of reported currency rates. While in the CC revenue guidance Infosys’s upward revision for FY19 to 8.5-9% growth from the prior estimate of 6-8% growth may motivate and encourage the investors. Since the June 2018 quarter, it was only a matter of time given a gradually rising year-on-year growth in the revenue. The notification of buyback at Rs 800 per share and a special sum of money of Rs 4 for each share show the commitment of the company towards meeting its capital allocation guidance. 

Continued friction in the digital revenue that was reported by TCS and Infosys denotes well as it reflects the readiness of the top tier software exporters in the country to adapt quickly to changing the client needs. Nearly one-third of the total revenue from the digital services is now earned by the both TCS and Infosys. IT stocks may indicate greater liability to change in the short-term, following the unstable currency markets. However, the trend looks promising in the long-term. The company clocked double-digit growth and announced some better rewards to the shareholders expecting an uptick in the business. It has taken a hit on margins due to the weight of assets gone disappointingly as well as higher sales costs.

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