Comparison of Infosys and TCS in light of Q2FY13 results

Infosys and TCS have announced their Q2 results for FY13 and it is a good time to compare the two and see where Infosys stands in comparison to TCS. This quarter has been important for Infosys, who in recent times has lost some of its reputation as being the industry bell-weather. Last few quarters have been in tough for Infosys and the peers have performed much better. TCS on the other hand has only consolidated its position as undisputed market leader.
In the analysis of the data below; we will try to see the signs of recovery and possibilities for Infosys.

INFY Vs TCS (comparison of size)

Parameters	INFY	TCS
Q2F13 Revenue (Million US$)	1797	2852.6
Quarter on Quarter Growth (%)	2.6	4.6
Operating Profit Margin (%)	26.3	26.7
Net staff	153761	254076
Attrition Rate (%)	15	11.4
Net staff addition in Q2F13	2610	10531
% Utilization	67.5	72.8
Revenue per staff per month in US$	3895.656	3742.44

TCS has done a sterling performance when in comes to quarter on quarter growth and curbing the attrition rate (amongst the lowest in the industry). What is remarkable is that it has overtaken Infosys on Operating margin as well!
The takeaway for Infosys here is that it has shown flexibility to reduce its margin. The revenue per staff for Infosys is higher than that of TCS though it has a lower utilization figure (67.5%). In fact if Infosys was able to increase the utilization to TCS level (72.8%); additional 43.5 MUS$ could have been generated in the quarter (theoretical). This could have pushed the QoQ growth to 5.5 from current 2.6.

Revenue from Verticals

Some of the observations are:

1.       Banking and Finance contribute the most for TCS while MFG contributes the least.

2.       In Infosys, the spread is more even with ECS being the smallest of all the verticals.

Note** For simplification; I have consolidated the verticals in TCS to match Infosys nomenclature

·         ECS = Telecom, Energy & utility and media & entertainment

·         RCL = Retail & Distribution, Hi Tech, Life Sciences & Healthcare, Travel & Hospitality and others

·         MFG = Manufacturing

·         Finance = Banking, Financial Services, Insurance

Geographic Breakup of revenue

Infosys has a much bigger exposure to North America and smaller exposure to Europe and India compared to TCS. This can be seen as a risk. Incidentally Infosys has just announced that it has completed the ground work for Infosys 3.0 strategy. As part of that strategy; Infosys has a vision to have a spread of revenues coming 40% from North America (and Canada); 40% from Europe (and UK) and 20% from rest of the world. Infosys also aspires to get even revenue; i.e.; 1/3 revenue from Transformation; 1/3 revenue from Optimization and 1/3 revenue from Innovation. (Interestingly that will not be by reducing the current revenues from high contributing area but by increasing the revenues from low contributing area. Talk of human ambitions!) New focus area like Sustainability, Engineering, Cloud, Products & Platform have been included. Infosys also aspire to do atleast 15% local hiring abroad to build a truly global company image. Infosys 3.0 is aiming at balancing the portfolio; strengthening the core and growing new business area. Incidently the credo for Infosys 3.0 is "Building Tomorrow's Enterprise". The credo for Infosys 2.0 was "Win in the Flat World" and that for Infosys 1.0 was "Powered by intellect; driven by values". How effective has been the implementation of Infosys 3.0 is to be seen in the times to come.

Top Contributing clients

Million Dollar Clients	INFY	TCS
>US$ 1M < US$ 5M	413	538
>US$ 5M < US$10M	205	269
>US$ 10M < US$ 20M	134	182
>US$20M < US$ 50M	195	108
>US$ 50M < US$ 100M	127	45
>US$100M	14	14

Infosys seems to have a significantly higher number of clients contributing revenue between 20 to 100 Million US$. This looks favorable considering that a smaller percentage of overhead cost (compared to revenue)will be incurred to serve a smaller number of high end clients . 

Conclusion

Infosys seems to be moving in the right direction. If the Infosys3.0 strategy is to click and bear fruits; we will see Infosys regaining its bell-weather tag. Acquisition of Loadstone; announcing salary hike for employees and keeping a low profile and cautious approach to the future might just work well for Infosys. TCS on the other hand is at the peak of its success and the expectations have already gone through the roof with its shares valuated at more than 14 times premium. Will be interesting to watch out for the last 2 quarters of the FY 13.

Note: The opinion expressed on the blog are my personal views. The data for the analysis has been sourced from the quarterly results published by both the companies on their websites.

Book Review by Anuradha Goyal

A prominent Blogger, author and book reviewer Anuradha Goyal reviewed "Onsite Opportunity" recently.
You can read the review here:
http://www.anureviews.com/onsite-opportunity-by-mukul-kumar/

Book Review on the Vault of Books

Review for "Onsite Opportunity" appeared on a popular Book review site www.vaultofbooks.com
You can read the review here.
http://vaultofbooks.com/?s=onsite+opportunity 

What I make out of Robert Vadra Allegations

The allegations are not new. We saw them sometime back going around facebook circuits. There was one post which showed a magazine clipping from Switzerland which noted that Rajeev Gandhi was one of the top depositors in Swiss Banks alongside dictators like Saddam Hussein, Muammar Gaddafi and Hosni Mubaraks. There were graphical details of Robert Vadra's expanding empire and he being the fastest billionaire of India.
Perhaps the less damaging was the one which revealed that Sonia and Rahul are still Italian citizens and that Rahul was expelled from Harvard and he got admission in St. Stephen's on Christian sportsperson (shooter) quota. (Thanks to Subramanian Swamy!)
       Putting allegations on Gandhi-Nehru family is not new. Is perhaps a national pastime. Since my childhood I have been hearing conspiracy theories like Indira Gandhi being scared of Sanjay Gandhi and she stage managing his accident; Rajiv in turn got suspicious of Indira and got her killed. There are also theories that after the shootout; she could have been saved if she was taken to AIIMS which was supposed to be designated hospital for the Prime Minister. Sonia made the ambulance loose valuable time by forcing it to go in circles and reach LNJP hospital which proved fatal. We have heard of the excesses the Indira-Sanjay nexus did in India during the emergency. Going further back; Nehru's ambition and lust for power got us loose Pakistan. That is to say, if he had given in to Mohammed Ali Jinnah's ambition and lust for power; India and Pakistan could have remained unified under the able leadership of Jinnah.

There is a dilemma of judgement. Should I respect Ashoka as a great ruler of Ancient India? At the face of it, it looks yes. He was among the first to unify large parts of India. He adopted Buddhism and spread this peaceful religion of tolerance and calm to many parts of the world. But do these actions make him clean of the acts of violence and immense blood shed in Kalinga (Odisha) and elsewhere? If today I have to consider Ashoka as a great person overall; can the same analogy be put to our Gandhi family and say that whatever happened happened. If you do more good than evil for the nation; we will forgive and forget whatever you ventured into past.
Tajmahal was built by using forced labour which included lots of child labour. Many of the workers lost their limbs and eyesight due to the strenuous nature of work. Hands of the chief architect were chopped off so that he doesn't create another marvel. Should we still consider Taj Mahal a National Pride?

As more and more transparency comes into our system and media and new found awareness instill in our Indian Society; hopefully the Politicians of the ruling party and the non ruling party will get exposed. If we talk about corrupt people in Congress; we also know how our other leaders are. Jayalalitha, Karunanidhi, Mulayam, Mayawati, Lalu Prasad, Devegowda, Kumaraswamy, Jagan Mohan Reddy, Narendra Modi, Mamta Banerjee, Nitin Gadkari.. do any of them give us a better alternative?  Nothing like it if we get an clean honest alternative to Congress. But if our expose operations make Indian republic topple like Libya, Iraq, Afganishtan; would you still support it?

Why I like Arvind Kejrival over all the other "India against corruption" activists

Today, on 2nd October 2012, Arvind Kejrival announced the vision for his new political party and vowed to take his fight against corruption to the parliament. While Arvind's capability to execute his vision is yet to be tried and tested on the harsh ground realities of Indian politics which not only comprise of corrupt politicians but also corrupt public; I must admire and wish good luck to Arvind for his courage and convictions.

I used the phrase "corrupt public" which might not be a politically correct statement but all of us have learned to be corrupt in this country due to centuries of conditioning. We have given up on resisting corruption. An electrician, telephone lineman, postman, RTO brokers, police constable, traffic police, land registration clerk, notary public lawyer.. the list goes on. Surviving in India is like passing through proverbial "kajal ki kothari" or a cabin of black collyrium. It is almost impossible to come out without any spot. Remember the college days when we would sign "proxy" for our missing classmates; would sneak into others papers during practical exams?

    I am little skeptic about the public always being better than the politician's because eventually the current corrupt politicians represent ourselves. If the politicians play the politics of caste, religion, region, language; it is also because the masses want favoritism and unjust advantage. It is to be seen how Arvind and his group of "honest politicians" fare against the corrupt electorate that they would represent.

    Nonetheless, it is a great step taken in the right direction. I always held that Anna Hazare is a good person, not necessarily a person with great vision and capability to steer the nation. At the height of his movement, I could sense he was no JP or Lohia. His methods were rudimentary and while it might work well for Ralegaon Siddhi; it would not work for a republic that is India. You cannot change the wrongdoers by tying to the telephone pole and beating with your army belt. I would also attribute Anna's movement's popularity  a lot to the people like Arvind Kejrival who worked in the background.

Here is my take on some of the crusaders against corruption and why I think Arvind is our best bet:

1. Anna Hazare:

A dry honest person with no selfish aspirations. Not sure on the vision and capability to run the nation. Is also gullible in hands of bad advisers as has become apparent on multiple occasions. He is like a mascot, many people try to use for their own selfish advantage. He contradicted himself when he said that Politics is full of dirt and no one should join politics. If you accept that politics has to be corrupt; why are you demanding the politicians to become clean?

2. Kiran Bedi

A Misguided missile. Good person at heart. Is fearless of establishment and instinctively outspoken. She lacks the depth and wisdom required to run an organisation. Gaps in her Armour was exposed when she opined that it was appropriate to point at the corruption cases done by Congress only and ignore BJP's wrong doings as they are not in power. She could become tool in hands of one corrupt opportunistic party against other.

3. Baba Ramdev

An eccentric and very dynamic person with ability to do achieve lots of things. He can be attributed to take yoga to household. His relentless ability to work has helped him amass an empire of Yoga, Ayurveda and spirituality. He has out shined all the people in his field. Today he owns the prominent TV channels which telecast all the spiritual programs run by his peers. His Ayurveda brand is giving a run for money to all the established names. He has the courage to challenge any establishment.

What he lacks is a balance of mind. The stitha prajna state of mind. He can be manipulated easily by his Pride and greed for recognition. He is in danger of becoming a puppet in hands of RSS and BJP. Astute politicians like Narendra Modi and Nitin Gadkari.

He also shows fox like characteristics of changing his statements. In one of the meetings he snubbed Arvind when he mentioned the name of Prime Minister and said that he was against personal attacks. Then in his rally he started calling names of everyone and became waving like Don Quixote. He also does not appear very clean in the means by which he has amassed his wealth.

So when I compare Arvind with his peers; I rate him very favourably in terms of his knowledge of current affairs; technical understanding of matter; balance of mind and ability to stand un-influenced by anyone.

One thing I hope he has is ability to accept his own criticism.

Good luck Arvind Kejriwal and I live with the dream of seeing India as a corruption free and just society.