It Sector
1 India Equity Research | IT
Sector Update
IT
Infosys versus TCS FY09 annual report analysis: Ten conclusions
TCS and Infosys have been compared on financial performance quarter after quarter. Needless to mention, there are several key operational parameters that have driven their performance over the years. Some of them are shortterm measures towards achieving long-terms goals, such as: (1) investments in research and development (R&D), patents and non-linear growth
Kunal Sangoi +91-22-6623 3370 kunal.sangoi@edelcap.com June 23, 2009 Viju George +91-22-4040 7414 viju.george@edelcap.com
strategies; (2) diversification in terms of delivery centers, nationalities, expansion of sales offices; and (3) use of sub-contractors; amongst others. In this report, we extract ten such parameters from the FY09 annual reports of TCS and Infosys and compare both the companies on those parameters. The results, both qualitative and quantitative, are interesting. Following are the ten parameters based on which we have compared TCS and Infosys: 1. Strategies on pursuing non-linear growth: TCS talks more on non-linear strategies in its annual report than Infosys does 2. Trends in R&D spend: Infosys has taken up its R&D spend markedly upward in FY08 and FY09, but TCS has a longer history of R&D spend 3. Number of patents filed/pending and cumulative patents awarded: TCS is far ahead of Infosys on cumulative patents granted 4. Foreign nationals in total employee base: TCS still leads, though the difference with Infosys is narrowing 5. Delivery centers outside India: TCS leads; nevertheless, we must be mindful of respective company definitions of a delivery centre outside India 6. Proportion of relatively less experienced employees (0-3 years band): In both the companies, there has been a maturing of the workforce over FY07-09 7. Segmental operating margin comparison: TCS fares almost as good as Infosys in major developed markets 8. Unallocated expense comparison in segmental
Sector Update
IT
Infosys versus TCS FY09 annual report analysis: Ten conclusions
TCS and Infosys have been compared on financial performance quarter after quarter. Needless to mention, there are several key operational parameters that have driven their performance over the years. Some of them are shortterm measures towards achieving long-terms goals, such as: (1) investments in research and development (R&D), patents and non-linear growth
Kunal Sangoi +91-22-6623 3370 kunal.sangoi@edelcap.com June 23, 2009 Viju George +91-22-4040 7414 viju.george@edelcap.com
strategies; (2) diversification in terms of delivery centers, nationalities, expansion of sales offices; and (3) use of sub-contractors; amongst others. In this report, we extract ten such parameters from the FY09 annual reports of TCS and Infosys and compare both the companies on those parameters. The results, both qualitative and quantitative, are interesting. Following are the ten parameters based on which we have compared TCS and Infosys: 1. Strategies on pursuing non-linear growth: TCS talks more on non-linear strategies in its annual report than Infosys does 2. Trends in R&D spend: Infosys has taken up its R&D spend markedly upward in FY08 and FY09, but TCS has a longer history of R&D spend 3. Number of patents filed/pending and cumulative patents awarded: TCS is far ahead of Infosys on cumulative patents granted 4. Foreign nationals in total employee base: TCS still leads, though the difference with Infosys is narrowing 5. Delivery centers outside India: TCS leads; nevertheless, we must be mindful of respective company definitions of a delivery centre outside India 6. Proportion of relatively less experienced employees (0-3 years band): In both the companies, there has been a maturing of the workforce over FY07-09 7. Segmental operating margin comparison: TCS fares almost as good as Infosys in major developed markets 8. Unallocated expense comparison in segmental