TCS to overtake combined $ revenues of Infosys + Wipro

Tata Consultancy Services (TCS) has outpaced Wipro and Infosys Technologies by posting a higher dollar revenue growth during the quarter ended 30 June 2014 (FY15Q1). TCS's dollar revenue grew at 5.45 per cent quarter-on quarter - far higher than  a growth of 1.96 per cent for Infosys and a 1.16 per cent for Wipro (see table below). 

TCS has been consistently posting results that have beaten market expectations, and has been growing at an average quarter-on-quarter- growth rate of 3.62 per cent for the last 12 quarters. 

TCS's rise was also helped by the steady decline in the fortunes of Infosys and Wipro - India's second- and third-largest IT services providers, respectively. The average quarter-on-quarter growth for Infosys in the last 12 quarters was 2.6 per cent and for Wipro 1.78 per cent.

Of the last 12 quarters, TCS has outperformed the two in 11 quarters. Wipro edged past TCS's growth in FY14Q1,while Infosys outpaced it in FY12Q3. TCS's quarterly revenue is now almost 96 per cent (up from 78 per cent in FY12Q1), that of the combined dollar revenues of Infosys and Wipro.

TCS, whose market capitalisation is currently 1.55 times higher than that of the other two, needs to grow at 6.5 per cent in FY15Q2 to overtake the combined dollar revenues of Infosys and Wipro.

The remarkable growth of the IT bellwether is backed by the company's optimism on the demand front. Hiring, a leading indicator of confidence in demand, suggests that TCS had anticipated stronger demand for IT services after the 2009 US financial crisis, that hurt Indian IT services providers.

TCS added 1,03,241 employees in the last 12 quarters, which is more than double the combined hiring of 48,686 for Infosys and Wipro. 

Attrition at Infosys has remained higher for many quarters now despite multiple corrective steps by the management. Infosys's attrition in FY15Q1 was 19.5 per cent, the highest since June 2010. Attrition at TCS in the same period was at 11 per cent in the IT services business, down from 14.8 per cent in three years.  For Wipro, it has been around 17 per cent.

The utilisation of manpower at TCS was higher at 85.3 per cent, (excluding trainees), up from 83.2 per cent three years ago. Infosys's utilisation at 80.1 is significantly lower compared to TCS's but has been higher from 74.9 per cent three years ago. Wipro has the lowest utilisation at 77.9 per cent, down marginally from 78.7 per cent three years ago.

All the top three IT services companies earned more than 50 per cent of their revenues from the US and around 20-25 per cent from Europe. TCS's revenues from the US was 58.3 per cent in FY12Q1, falling to 55.83 per cent in FY15Q1. Similarly, Infosys reduced its  revenue share from the US from 64.20 per cent to 60.8 per cent, while Wipro reduced it by 3.20 percentage points to 49.8 per cent.

How they grew