By Ruma Dubey

The comparison of the performance of the three big wigs of IT in India shows that once again, TCS scores the highest. In terms of revenue – both INR and US$, it is mush ahead of its peers. Even in terms of profitability, TCS comes tops but this time around, EBIT margins of Infosys have become better, in terms of improvement. Wipro’s performance, compared to these two, looks pretty muted. In fact, Wipro has the highest attrition rate amongst the three.

The geographical aspect shows the pain which the sector went through in FY14. For all these companies North America is the big market and through the year, for all three, there has been a degrowth, which in all probability, in current fiscal, will change to growth. And Europe; while we have been talking about contraction of growth and fall in demand, all three IT companies have reported a much better growth. Infosys has balanced this fiscal with a very good growth, of over 23% in India though TCS and Wipro, reported better growth in Rest of World.

HCL Tech ends its year on 30^th June, which is why it has been considered here for a full year performance appraisal.

In terms of clients, Wipro did much better but TCS, during the Q4FY14, added no new clients. But what is pertinent to note here is that it is not really hunting for new clients but is farming clients – meaning more clients from $50 million are migrating to $100 million. Its $100 million client addition, over the past 12 quarters has gone up three times. It went up from 8 in Q4Fy11 to 24 in Q4Fy14 while that of Infosys, during the same period has been 13 from 11. And in the $50 million category, TCS has doubled its clients from 27 in Q4FY11 to 53 in Q4FY14. TCS now seems to be concentrating more on ‘quality’ of clients rather than ‘quantity’.

In terms of guidance, Infosys takes the lead when it comes to presenting a somber picture. The company, For FY15, has guided a revenue growth of 7-9%, lower than the previous fiscals guidance, giving no EPS guidance.But apart from the performance, the conservative guidance and the management giving a very cautious outlook for the future, despite the overall industry outlook improving has spooked the markets. So the questions being asked is whether this is an issue with Infosys alone or that of the management.

TCS does not give guidance but it had a very optimistic view for the future as the CEO and managing director of the company has said, he was “upbeat that the next 12 months will bring many more opportunities for growth across multiple industries and markets”.

Wipro currently is amongst the most ‘pessimistic’ in terms of guidance as it expects  a weak performance in the June quarter due to slower growth from its India business and lower spending from overseas clients in the retail and insurance sectors. But at the same time, has said that company’s growth trajectory for FY15 remained intact and would not be affected by a weak first quarter.

Wipro remained the top loser on the BSE today, ending 8% lower. The reason – a very muted outlook for Q1FY14, stating that it expects revenues from IT services business to be in the range of US$ 1,575 million - 1,610 million, which is actually a 0.6% decline on a sequential basis.

A quick word about HCL’s Q3 performance for period ended 31^st March 2013. It posted a set of very good numbers, with a 8.5% (YoY) and 59% (QoQ) rise in consolidated net profit at Rs.1624 crore. Revenue rose 2% (YoY) at Rs.8401 crore. In US $ terms, its net profit grew 9% (QoQ) at $264 million on a 3% rise in revenue at $1361 million. The good news is that company has been consistently hiking its EBIT margins and for the tenth straight time, margins came at 24.6%, which is a 7.1% (QoQ) and 44.5% (YoY). This is one of its margins ever. This good performance was despite the forex loss of US$23 million during the quarter though it was lesser than US$25 million in Q2.

HCL Tech does not give guidance and hopes to continue to do better through client mining, which is to get more from same clients, targeting large contracts coming up for renewal offering better pricing to the customers.

So then, which is better amongst the biggies? Purely in terms of fundamentals, TCS emerges on the top and HCL shows much potential going ahead. In terms of pure stock market logistics, TCS has gone up substantially and trades at a higher PE to Infosys. This makes calling out aggressive prices on the counter extremely difficult. On the other hand, Infosys has been battered down a lot and things might look up in H2FY14, once the management churn has settled. Most brokerage houses have given a buy on TCS and HCL and maintain a cautious outlook on Infosys, with many even calling a sell and outlook remains mostly muted on Wipro.