TCS And Infosys Q1 Results: A Case Of Contrast In Growth And Attrition

India’s two largest IT majors announced their results last week, which were in contrast to each other when it came to growth and attrition.

Growth

If TCS’ slow growth surprised industry watchers, Infosys surprised them with its strong growth.

TCS was cautious yet confident on growth where Infosys was positive and even increased its revenue guidance from 7.5-9.5 percent to 8.5-10 percent for the full year FY20.

What had changed? The growth, analysts said, came at the back of strong deal wins at $2.7 billion, its highest ever for a quarter. Like its CEO Salil Parekh said, the company has a seen double digit growth across most sectors. Its digital strategy, both organic and inorganic, is paying off with close to 36 percent of revenue coming from digital.

If you take banking, the company had grown 11.3 percent in constant currency as opposed to 9.3 percent for TCS. This is significant considering that banks have been cautious with their investments.

This caution was in part what pulled the growth down for TCS, for whom BFSI is one of the largest revenue generators.

Nilanjan Roy, CFO, Infosys had attributed the growth to the company’s banking product platform Finacle and the acquisition of Stater in May 2019.

But it was not just that though. Infosys was also able capitalize on the growing investment in the 5G space, which reflected in the 22 percent growth the company saw in the first quarter. The company working with telecom players across the world for developing 5G networks.

If you take BFSI for instance, the company has invested in developing capabilities in the mortgage space, where there is a gap in the US market. Close to Rs 1,000 crore investment was made by Infosys in the acquisition of Stater and leveraging its own platform Finacle. It was able to turn the tide in its favour in BFSI despite weakness in the sector.

Roy said the company is looking to develop similar sub-sectoral capabilities across various segment. This probably explains that company’s confidence in reaching the new revenue guidance.

Attrition

However, the growth on the back of high attrition rates has raised eyebrows. This is again in contrast to TCS’, which is able to maintain its  attrition rate at 11.5 percent. For Infosys it stood at 23.4 percent, one of the highest Infosys has seen.

Parekh explained that while the quarter accounts for seasonally high attrition, this includes involuntary attrition as well. He did not offer further explanation on layoff numbers or the net number of employees added in Q1.

Layoffs aside, the recruitment plan for FY18, which stood at 18,000, is less compared to the number of people leaving the company.

TCS in Q1 saw the highest every addition of employees for a quarter at 12, 356 in the last five years. UB Pravin Rao told media persons in the press briefing that the attrition is not affecting the projects.

However question of at what cost the growth has come despite the high attrition remains.―Money Control