“Double-digit growth, higher quality of the incremental business, and best-in-class execution capabilities have helped us expand our operating margin year on year. Our foresight in investing very early on in building digital skills and transformational capabilities has not only gained us market share, but has also resulted in our very resilient, industry-leading margin today," said V. Ramakrishnan, chief financial officer (CFO) at Tata Consultancy Services.
Infosys’ Q4 revenue rose 9.1% on year to $3.06 billion. The company delivered on the top end of its 9% annual revenue growth outlook in constant currency terms, the outlook having been increased from 6-8% in the last quarter. It delivered on the Ebit margin outlook for FY19 as well, the metric coming at 22.8%, albeit towards the lower end of the company’s guidance of 22-24%.
Ebit stands for earnings before interest and taxes.
Profits of Infosys were up 1.7% at $581 million in the March quarter, higher than the Bloomberg estimate of $570.07 billion.
TCS continued its margin dominance with 25.1% in the just-concluded quarter, while Infosys came with a guidance that chimes with a challenging environment, as currency tailwinds are put behind and the US gets stricter with visa permissions.
Infosys has given an operating margin guidance of 21-23% on a revenue growth outlook of 7.5-9.5% in constant currency terms. In the last quarter, Infosys’ operating margin was 21.5%.
In constant currency terms, the March quarter revenue of TCS rose 12.7%, the fifth straight quarter of year-on-year double-digit revenue growth in constant currency terms for the Mumbai-based company. Infosys’ revenue growth in constant currency terms for the quarter was right behind TCS’s at 11.7%.
Infosys continues to suffer from high attrition, a concern accepted by chief operating officer Pravin Rao during a press briefing. The attrition rate increased to 20.4% in Q4FY19 from 19.5% in the same period last year. The company had net additions of 2,622 staff in the quarter gone by against TCS’s 6,356.
“...Realization per billed employee was steady, which reflects increasing usage of automation in core services and faster growth in newer digital services," said Rao. “Overall attrition remains high and we are continuing our focus on arresting the same."
“From an H-1B point of view, there are some changes, but a local degree was always a criteria. So there will be an advantage for people who have done masters in the US. Wherever we are we have to hire locally, that is the culture, and we have to meet the talent demand of the area," said Ajoy Mukherjee, executive vice president and global head of recruitment at TCS.
TCS chief executive officer and managing director Rajesh Gopinathan said that revenue from industry segments such as banking and financial services have improved and are in a much better position than last year.
“All elements of our strategy have worked this year," he said.
"We are more focused on opportunities at a customer level. Macro is important but macro doesn’t buy, customers buy. Our new deals have been built on organically invested assets to generate market leading opportunities in order to drive the digital champion status we are seeking."
On Friday, TCS shares fell 0.26% to ₹2,013.75 apiece on the BSE while those of Infosys gained 0.63% to ₹747.85 per share. The benchmark Sensex gained 0.41% to end the at 38,767.11 points. The BSE IT Index gained 0.19% to close at 15,471.41 points.