Infosys will find it difficult to beat TCS in growth this year


IT stocks may show greater volatility following the turbulent currency markets.
InfosysNSE 0.56 % showed stronger momentum in the dollar-denominated revenue than larger peer Tata Consultancy Services(TCSNSE -2.44 %) for the December quarter in reported as well as constant currency (CC) terms.

The operating margin though fell significantly by 110 basis points to 22.6% following the adjustments pertaining to the fair values of Panaya and Skava, the two divisions that Infosys is in the process of selling.
Despite better sales traction, investors waiting for the company to report a better topline growth in the current fiscal than TCS may have to wait. Given the slower growth in the previous quarters when compared with TCS, Infosys would find it difficult to overtake the latter in growth momentum for FY19. TCS may therefore post a better full-year revenue growth for the third consecutive fiscal in terms of reported currency rates.

IT stocks may show greater volatility following the turbulent currency markets.

While Infy’s upward revision in the CC revenue guidance for FY19 to 8.5-9% growth from the earlier estimate of 6-8% growth may cheer investors, it was only a matter of time given the gradually rising year-on-year growth in revenue since the June 2018 quarter. The announcement of buyback at ?800 per share and a special dividend of ?4 for each share shows the company’s commitment towards meeting its capital allocation guidance.

A continued traction in the digital revenue reported by TCS and Infosys augurs well since it reflects the readiness of the country’s top tier software exporters to adapt quickly to changing client needs. Both TCS and Infosys now earn nearly onethird of the revenue from the digital services.