The first quarter results of the country’s top two software exporters, Tata Consultancy Services (TCS) and Infosys, reflect muted business momentum similar to that seen over the past few quarters. Though their management commentaries highlight traction across business verticals and geographies, some of the parameters such as languishing addition of large clients and slowing headcount addition tell another story.
Momentum in large client accounts is crucial for long-term sustainable growth. Stagnation there indicates slower growth trajectory. In the June 2017 quarter, TCS added one client each in the above $ 50-million and above $ 100-million brackets sequentially . Compared with the year-ago period, the $ 50-million bracket reported eight additions while the $ 100-million bracket showed one client less. For Infosys, the numbers were hardly different sequentially as well as year-on-year.
These factors reveal the stress on Indian IT exporters due to changing business mix as clients shift to new technologies which require lesser human interface and lower investments. Rising protectionism in the US is another challenge. To their credit, IT vendors are adapting to the new landscape of opportunities by making hiring flexible and focusing more on recruiting local talent.
Between TCS and Infosys, the latter has shown greater business traction in the past few quarters.Based on the trailing twelvemonth (TTM) analysis, Infosys has delivered better YoY growth in dollar denominated revenue than TCS in each of the past six quarters. In the June quarter, its TTM revenue grew by 6.3 per cent to $ 10,358 million. For TCS, the TTM revenue was 5.5 per cent higher at $ 17,804 million.
The management commentaries of each of the companies reflect cautious approach in the short term and focus on achieving stability in the medium term. For their stocks, it means a few more quarters of subdued performance. On Friday , TCS shares fell 2 per cent to 2,395.5 while the Infosys stock lost 0.4 per cent and closed at `972.1.