IT major Infosys has raced past industry leader TCS in all the four quarters in FY16, as far as revenue growth is concerned, signalling a turnaround in the company’s fortunes.
TCS, the largest IT services exporter had consistently beaten its nearest rival Infosys in the last few fiscals and widened the gap in terms of revenue and net profit growth. However in FY16, Infosys has recorded a revenue growth of 9.1% in US dollars while it was 7.1% for TCS.
TCS had recorded a revenue growth rate of 15% in FY15, falling more than 50% in FY16. In case of Infosys, it had recorded a growth of 5.6% in FY15 in dollar terms but raised it to almost double digit growth in FY16.
Under the leadership of Vishal Sikka, Infosys has also come out with an aggressive guidance for FY17.
In the four quarters of FY16, Infosys has consistently beaten market expectations and raised the strong possibility that it may once again regain the bellwether status that it enjoyed not so long ago. According to Sanjoy Sen, Doctoral Research Scholar, Aston Business School,UK, both the companies had performed below market expectations in the recent past though the equation has changed now.
“There is no doubt that Infosys appears to be moving in the right direction to narrow the gap with TCS on all fronts – strategic, financial or operational parameters,” he said.
According to industry observers, despite the size of TCS, it has been able to maintain its growth due to its superior execution skills and the global reach of its delivery centres.
At the same time, they are now perplexed by their relative underperformance over the last six quarters.
On the other hand, Infosys has once again displayed a consistency which was its hallmark of the past with its mantra of “under promise and over deliver”. For FY17, the IT major has provided a revenue guidance of 11.5-13.5%, which is higher than the benchmark of 10-12% set by Nasscom.
Refusing to be drawn into the debate on whether Infosys is a bellwether once again for the Indian IT industry, CEO Vishal Sikka during a media interaction on Friday last said, “I think in terms of being a bellwether…….it is for others to characterise. We keep working on our mission, on our paths, our strategy.”
However, on the operating profit margin (OPM) front, TCS continues to hold the upper hand when compared with Infosys. At the end of fourth quarter of FY16, TCS reported a OPM of 26.1% while it was 25.5% for Infosys.
Infosys traditionally enjoyed higher OPM among all the large Indian IT players but it has stated that it is comfortable in the range of 24-26% in the near to medium term.