TCS-Infosys net profit gap widens by Rs 1k crore in FY14

Written by fe Bureau | Bangalore | Updated: Jan 22 2014, 16:38pm hrs
TCS CEOTCS has outpaced Infosys both in terms of profit and operating margins.
Indias largest IT services exporter TCS has opened up a lead of over Rs 2,400 crore in net profit over its nearest rival Infosys in Q3, compared to a gap of Rs 1,400 crore in Q1. Thus, the gap in net profit has widened by Rs 1,000 crore in the same financial year, with still a quarter to go.

For the recently concluded October-December stretch, TCS posted net profit of Rs 5,314 crore compared to Infosys' profit at Rs 2,875 crore, revealing a difference of R2,439 crore between the two top-tier IT firms. Even, during the second quarter of the current fiscal TCS' net profit was close to double than that of Infosys. For the September quarter, TCS posted profit of Rs 4701.8 crore as against Rs 2407 crore recorded by Infosys during the same period.

However, this was not the situation about four years ago when Infosys had an edge of close to Rs 300 crore over TCS during the fourth quarter of fiscal 2009. But, over the last four fiscal TCS has consistently recorded higher profit than its Bangalore-based rival.

We have been able to maintain our profitability by operating in a disciplined manner while sustaining our investments in customer-facing initiatives globally, said Rajesh Gopinathan, CFO, TCS, while announcing the third-quarter results.

Infosys for quite some time had managed a superior edge with its net profit being higher than TCS, powered by high operating margins. Of late, the situation has reversed with TCS outpacing Infosys both in terms of profit and operating margins. During the third quarter, TCS posted operating margin in rupee terms at 31.4%, while it was 25% for Infosys. It was in the second quarter of FY13 that TCS overtook Infosys in operating margins and since then it has consistently maintained this difference.

The improvement by TCS has lot to do with driving internal efficiencies within the organisation in terms of utilisation and also deploying a better mix in terms of employee matrix. For the third-quarter, TCS recorded utilisation excluding trainees at 84%, one of the highest in the industry, while for Infosys it was 78% during the quarter.

Experts point out that growth for TCS has been board based and across industry segments. Some felt it is the booster dose the Mumbai-based IT major got from its backbone financial services and insurance vertical that led to the industry leading growth. During the October-December period of the current fiscal, banking, financial services and insurance (BFSI) business contributed 42.7% to the overall revenue of TCS.