Five factors that helped TCS score over Infosys in Q1

Tata Consultancy Services (TCS) beat expectations yet gain by recording a strong sales and volume growth in dollar terms for the first quarter of FY15. Its robust performance comes in stark contrast to the lacklustre quarterly numbers reported by its close peer Infosys last Friday. There are five factors that put TCS ahead of Infosys.

1)Volume Growth: TCS delivered a strong volume growth of 5.7% sequentially for the first quarter, better than the expectations of 4.5-5% growth. This was also much stronger than the 2.9% growth reported by Infosys. This reflects the higher business momentum and faster ramping up of projects for TCS relative to Infosys.

2)Topline traction: The dollar denominated revenue grew by 5.5% to $3,694 million for TCS. Analysts had anticipated a growth of over 5%. Infosys, in contrast, reported 2% growth in the topline. Barring insurance, TCS showed momentum across verticals and geographies.

3)Operating margin: While each of TCS and Infosys demonstrated a tight control over operating profitability, TCS continued to dominate with better margin. It reported 26.3% operating margin compared with 25.1% for Infosys. TCS reiterated that it would prefer a margin range of 26-27% and a margin above that would be used to reinvest in operations.

4)Utilisation: TCS continued to exhibit a strong control over employee utilisation during the quarter. Its rate of utilisation excluding trainee was 85.3%, among the highest in recent quarters. Infosys, too, reported a higher utilisation rate but compared with TCs, it was lower at 80.1%

5) Attrition: Employee attrition emerged as a major concern during the results presentation of Infosys last Friday as the company continues to report a higher outflow of talent. Its attrition shot up to 19.5% from 16.9% a year ago. For TCS, it increased to 12% from 10.5% a year ago.