Quarterly Performance Analysis- Summary:
- Structural tailwinds like higher spend on technology, industrialization of digital projects and increasing offshoring outweighing growth concerns for the industry despite global macro concerns, BREXIT related uncertainties in the UK/EU and global trade frictions
- For many companies, early investments in Digital have started paying off adding to the growth momentum
- Client relevance continues to rise with large deal win momentum, a rising share of digital implementation projects, strong scope increases & improving client mining
- Positive revenue growth during Q42019- Q-o-Q growth (excl Cognizant) was at 2.6% compared to 2% in Q32019, Y-o-Y growth of 8.5%. (Reported currency). Including Cognizant in the sample set, the revenue growth for the quarter comes down to 2.1% compared to 2.2% previous quarter. Further accentuates the sudden decline in Cognizant’s performance this quarter as till last quarter, Cognizant was growing faster than industry
- Strong order books, sustained client mining and digital traction, driving growth momentum
- Mid-tier companies (Persistent, Mindtree, Cyient, Hexaware, LTI, Zensar) also recorded an average growth of 1% during the quarter, almost in line with the top players (TCS, Infosys, Wipro, HCL) at 2.6%
- Digital deals & revenues growing: Q-o-Q growth was at 7.2% compared to 6.6% in Q32019, Y-o-Y growth of 39%. (TCS-31% of revenue share, Y0Y growth 41%, Infosys-32.5% of reve, Y-o-Y growth of 38%, Wipro-35% of reve, Y-o-Y growth of 34%)
- Sustained digital share gains, consistent large deal wins indicating strong deal win momentum
- Margins remain under pressure: Margins remained under pressure for all the top companies during the quarter.
- Seasonal wage hikes, currency fluctuations and investments in automation, localisation and sales initiatives impacting margins.
- Firms continue to add headcount: Headcount growth was at 1.5% QoQ and Y-o-Y growth of 9.7%, a net addition of over 16,500 employees during the quarter.
- Firms addressing suitable talent requirement by building local scale in the US.
- Top 4 firms (TCS, Infosys, Wipro, HCL) together added over 82,600 employees during the year ending March 2019
- Demand trends broadly stable:
- Telecom, Manufacturing and retail sectors drove growth while BFS remained stable
- North America and Europe grows: Europe records positive growth (2.5%) during the quarter while North America recorded substantial growth of (3.5%).
- Operational Metrics: Key operational metrics continued to remain robust for the firms with no major variations during the quarter
|Attrition||18.4% (17.7%)||Attrition levels increases -expected as employees move out for further studies and new growth areas|
|Utilization (excl trainees)||81.9% (81.9%)||Utilization levels remains consistent as firms continue to invest in measures to improve productivity and efficiency|
|Client Additions||Client additions remained positive for the top firms, while slight slowdown for medium players|
|Revenue/Employee ($k)||50 (49.8)||Revenue per employee increases marginally in Q4FY19 compared to previous quarter|
|Onsite as a % of revenue||55%||Onsite continues to account for over half of total revenue share|
- Reported Company Guidance:
- Infosys – FY20 revenue guidance (7.5%-9.5%, CC YoY) –For FY19 the company recorded a growth of 7.9%
- Wipro- 1QFY20 guidance of -1.4% to 0.6% QoQ, Weak quarter guidance despite strong deal wins highlights Wipro’s persistent execution challenges
- Cognizant-US- Revenue guidance of 3.9-4.9% CC YY for 2Q. CY19 revenue guidance has been cut sharply to 3.6-5.1% CC YY from 7-9% YY CC.
- HCL- FY20 revenue growth guidance of 14-16% CC (13.4-15.4% in US dollar)
Analysis is based on the quarterly financial results of listed companies (Infosys, TCS, Wipro, HCL, LTI, Cyient, Hexaware, Persistent, Mindtree, Zensar) accounting for over 36% of the total Industry revenues
Source: Company results, management commentaries and Analyst Reports