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Infosys Vs TCS: The Fight Continues

Tata Consultancy Services (TCS) and Infosys are two of the strongest pillars of the Indian IT sector. One is India’s largest IT services company, and the other the most respected.

However, since they are the ‘poster boys’ of Indian IT, and are keenly looked up by stock markets, industry and job seekers, the rivalry too runs deep between them.

So whether it is the fight for talent, clients, deals or stock market valuations, the two companies are at each other’s neck all the time.

In this post, I present a graphical comparison of the two companies based on their performance over the past 20 quarters (5 years).

Let’s start right here.

Sales: There’s no doubt that TCS scores over Infosys here. In fact, as you can see in the chart below, the former has even extended its lead over the latter in the past few quarters.

Sales Growth: This has been an even race over the past five years. However, TCS has outclassed Infosys if you were to compare their numbers over the past two years.

EBITDA Margins: EBITDA or “Earnings Before Interest, Tax, Depreciation & Amortization” measures a firm’s operating profitability, and Infosys scores hands down on this front. While TCS scored better for a couple of quarters recently, Infosys has again upped the ante in the latest completed quarter.

Net Profit Growth: The story of sales growth repeats here as well, with the first two years going to Infosys and the next three to TCS. In fact, except for the latest quarter, Infosys never seemed to regain its touch that it lost when the global crisis started impacting the Indian IT industry in early FY10.

Net Profit Margin: Like on the EBITDA margin front, TCS has caught up on Infosys here as well.

No. of Employees: The Indian IT industry has a linear business model. What this means is that if you want to grow your sales, you must hire more and more employees. As such, like its sales trajectory, TCS has outperformed Infosys on this front as well. It has, in fact, extended the lead in employee addition in the recent quarters, which somewhat signifies the management’s positive outlook on the future.

Revenue per Employee: This is a very important metric for IT companies, as this indicates employee productivity. Infosys has been an outperformer on this front over the past three years.

BFSI share of Sales: BFSI stands for “Banking, Financial Services & Insurance”. It is one industry that contributes the maximum to the sales of Indian IT companies. This is also the industry that has been impacted the most in the current downturn given the state in which US and European banks (Indian IT companies’s biggest clients) find themselves.

As you can see from the chart below, TCS has a larger exposure to this sector as compared to Infosys. This is one major risk that the company faces in case the situation were to worsen in the western world.

P/E Comparison: Talking about these companies’ stock market performance, Infosys used to command a premium over TCS when it came to the P/E or price to earnings that investors were willing to pay for these stocks.

However, as we have seen above, TCS has been a relatively better performer over the past few quarters. This has led to the company matching, and sometimes outperforming, Infosys’s P/E during the recent times.

However, as the P/E chart shows, there’s not much to choose from for investors as both the companies look equally valued as of now.

5-Year Returns: Here is a chart that compares the returns that investors have earned from Infosys’s and TCS’s stocks over the past 5 years. As you can see, a better performance from TCS has helped its stock outperform Infosys’s over this 5 year period. What is more, the margin of TCS’s outperformance has been pretty good at around 40%.

What next?
Given the management views from both these companies after their latest quarterly results, the near term looks challenging in terms of business performance. However not much can be said about the near term performance of their stock prices, given the way these have behaved in the recent past.

Over the long term, a lot would depend on how these companies are able to work around the key challenges of currency volatility, weak western economies, and talent retention.

The one that can face these challenges better will come out tops – both in terms of business and stock market performance.

However, as of now, it’s even-steven.

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About the Author

Vishal Khandelwal is the founder of Safal Niveshak. He works with small investors to help them become smart and independent in their stock market investing decisions. He is a SEBI registered Research Analyst. Connect with Vishal on Twitter.


  1. This is an excellent analysis Vishalji. Only thing I am not thrilled is the conclusion of even-steven :). You could have stood behind either of them that you think is the right investment to be in one’s portfolio. But this is fine too, let’s one think and take their own decision. Thanks for sharing.

  2. this is really great.. thanks 🙂

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