TCS widens lead over Infosys on operating margin

For the third quarter, TCS reported an operating margin (OPM) of 27.3% against Infosys’ 25.7% during the same period. During the December quarter, TCS had an operating margin expansion of 51 bps, while Infosys witnessed a margin erosion of 66 bps, owing to wage hikes.

Experts say an improvement in terms of utilisation rate and deploying a lower employee wage base have led to better margin performance for TCS. The utilisation level of TCS reached a high of 81.7%, excluding trainees, in Q3, while Infosys had an utilisation rate of 73.2%.

However, sequential revenue growth of the Bangalore-headquartered software services firm was faster than its larger rival, TCS, during the third quarter. Infosys’ topline grew 5.7% quarter-on-quarter to Rs 10,424 crore, while TCS registered a 2.9% sequential revenue growth to Rs 16,070 crore.

Traditionally, Infosys, which prefers not to sacrifice margins to gain higher volumes, has enjoyed better operating margins compared with other top-tier Indian IT vendors. But, over the last few years, TCS has consistently managed to deliver better margin performance, narrowing the gap with Infosys.

In Q2, TCS had overtaken Infosys on the operating margin front, albeit narrowly. The Mumbai-headquartered IT firm reported OPM of 26.8% against 26.3% registered by Infosys during the same period.

TCS chief financial officer S

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