TCS v/s Infosys Company Performance Analysis (Q3 Result Update)

TCS v/s Infosys Company Performance Analysis (Q3 Result Update)

A comparison between TCS & Infosys has been presented here. The comparison is completely based on their Q3 results. We will also discuss about a new revenue segment talked about by technology sector companies. There is also a lot of chatter on the media relating to this and how it is changing things.

TCS

In Rs. CroreQ3FY19 Q3FY18 YoY Growth (%) Q2FY19 QoQ Growth (%)
Revenue 37,33830,90420.80% 36,8541.31%
Operating Profit 11,246 9,157 22.81% 11,008 2.16%
Net Profit 8,1056,53124.10%7,906 2.58%
  • Revenue
    • A very healthy growth on Year-on-Year (YoY) basis [Oct-Dec Quarter of 2017 & Oct-Dec Quarter of 2018]
    • If July-Sept Quarter 2018 is compared with the current Quarter (Oct-Dec 2018), then there is hardly any growth in their revenue, which is a very disappointing growth.
  • Operating Profit
    • The YoY growth looks very good but the QoQ growth again looks disappointing.
  • Net Profit
    • A very healthy YoY growth. But the QoQ growth, here too, has the same story.
  • The QoQ growths are very muted. No positive reactions can be seen in the media too, about the results.
  • The stock price of TCS has obviously fallen after the declaration of these results.

Infosys

In Rs. Crore Q3FY19 Q3FY18 YoY Growth (%) Q2FY19 QoQ Growth (%)
Revenue 21,40017,79420.30% 20,6093.80%
Operating Profit 4,830 4,319 11.80% 4,894 -1.30%
Net Profit 3,6105,129 -29.60% 4,110 -12.10%
  • Revenue
    • The YoY growth of Infosys is on similar line with that of TCS. The QoQ growth are not that exciting.
  • Operating Profit
    • The YoY growth is very disappointing compared to other IT companies. The QoQ growth is negative that is it has declined in actual terms.
  • Net Profit
    • The operating profit has increased, which would mean that the business has definitely grown. In 2017, in Oct-Dec quarter, Infosys had received an Income Tax set-off because of which they had hardly paid any taxes at that time. But this time they didn’t receive any set-off. Last year, they had paid tax of around Rs. 150 crores and this time they have paid tax of almost Rs. 1,500 crores. That is why there is such a huge drop in the YoY growth.
    • In YoY growth the fall is justified, but in QoQ growth the profits have definitely fallen, which is not a good thing.
  • The results of Infosys look negative as compared to TCS.

Digital Business of Infosys & TCS

Companies, particularly technology companies, have started displaying their revenues in 2 types – digital business and core business.

For this, we searched and looked around a little to know what this digital business is exactly. What is this new business segment where all the companies are trying to establish themselves and they are experiencing growths? Even if you google about it, you will not find any concrete definition or explanation on digital business. No answers could be found as to what is this digital business of these technology companies and what their core business is.

When a certain people who work at good positions in top IT companies were asked about it, it was found that this Digital Business is all a imaginary definition of growing segments of business. It is just a tactic used by these companies. If one is talking about information technology, then everything is digital only. All of this is just a propaganda and one should not focus on this.

One should only focus on the Total Revenue growth as it is the most important aspect to watch out for in any technology company or any other company. The underlined theme to understand here is that growths in revenue, operating profit and net profit are the things to concentrate on. Companies are just trying to confuse by claiming to make huge growths in digital business and their core business is a little sluggish, because of they look declining. But the truth here is that it is all a marketing gimmick to divert the attention.

Also, this does not mean that TCS and Infosys are bad companies. They are among the top IT companies in India, but they may just be doing this because of competition.

Below you can see their digital business and core business revenues: –

  • TCS
In Rs. Crore Q3FY19 Q3FY18 YoY Growth (%) Q2FY19 QoQ Growth (%)
Digital Business 11,2396,830 64.55% 10,319 8.92%
Core Business 26,09924,0748.41% 26,535 -1.64%
Total 37,33830,90420.82% 36,854 1.31%
  • Infosys
In Rs. Crore Q3FY19 Q3FY18 YoY Growth (%) Q2FY19 QoQ Growth (%)
Digital Business 6,745 4,379 54.03% 6,769 -0.35%
Core Business 14,642 12,399 18.09% 15,080 -2.90%
Total 21,400 17,794 20.27% 20,609 3.84%

Note: – The numbers shown above are just to explain you how the companies are presenting them. One should not focus on these digital business numbers and judge these companies on its basis.

Notes: –

  • We are not suggesting anyone to buy the stocks of these companies. Only their Q3 results have been discussed.
  • No claims are being made as to which company is better and which is not.

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