Mumbai: Cognizant Technology Solutions Corp. has beaten India-based competitors such as Tata Consultancy Services Ltd (TCS) and Infosys Technologies Ltd in terms of incremental revenues for the first time ever in the 12-month period from April 2008 till March.
The firm reported revenues of $2.9 billion (Rs14,413 crore today) for FY09, $600 million more than the revenues in FY08. Adjusted for two small acquisitions, the incremental revenues stand at $558 million.
This is higher than the incremental revenues of $487 million reported by Infosys and the $310 million (adjusted for acquisitions) reported by TCS. For perspective, these two companies are 1.6 times and 2 times the size of Cognizant, respectively. Wipro Ltd’s information technology (IT) services division, 1.5 times the size of Cognizant, reported incremental revenues of about $530 million after adjusting for revenues added through acquisitions. HCL Technologies Ltd, which makes up the top five in terms of IT outsourcing work to India, reported incremental revenues of $220 million on an organic basis.
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This is the first time Cognizant has beaten its competitors in terms of absolute revenue growth. It has been beating them in terms of percentage growth for over five years, with an outperformance of about 10 percentage points.
The outperformance is likely to continue this year, based on the guidance given by the firm and by others such as Infosys. While Infosys expects revenues to decline by 3.1% to 6.7%, Cognizant expects revenues to rise by at least 10% in the year ending December. Cognizant follows the January-December period as its fiscal year, but these calculations have used the April-March period for comparison purposes.
The likelihood of Cognizant’s feat has previously been reported, but that it had done so became clear after it released its results for the first quarter ended March. Revenue increased 16% to $745.86 million and net profit 11% to $113.13 million in the quarter compared with a year ago.
“We are pleased with our performance during the first quarter, which exceeded our revenue guidance and demonstrated Cognizant’s continued ability to outperform the industry,” Cognizant’s chief executive and president Francisco D’Souza said.
“Looking to the full year, we remain confident of achieving our full-year guidance of at least 10% revenue growth,” he added. Cognizant ended the first quarter with $969 million in cash.
Karl Keirstead from the New York office of Kaufman Brothers Lp says it’s a conundrum for the street how Cognizant has been able to beat its competitors by such a wide margin.
The consensus, he says, is that Cognizant is doing a better job at execution and has a relatively healthier client as well as industry mix in its portfolio. It has a large exposure to the healthcare sector, where spending on IT is growing at a healthy clip. Although the company has a large financial services exposure, its client mix is superior. Cognizant’s largest client is JPMorgan Chase and Co., which has come out as a winner in the crisis.
Other Indian outsourcers have large exposures to banks such as Citi and Bank of America, which have been hit badly.
PTI contributed to this story.