Web analysis: Bellwether status should shift from Infy to TCS

TCS has managed to impress with a fine set of numbers and a positive outlook for FY13

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The body language said it all. While Infosys was full of excuses for its poor performance and obscure in its guidance, TCS was like a breath of fresh air. A robust performance in difficult times led the TCS management to paint a clearer picture for the future.

N Chandrasekaran, CEO and MD, TCS, commenting on the path ahead said, "TCS is well prepared to achieve balanced growth across the industries and markets it operates in, given its holistic portfolio of services which are now achieving significant scale across markets."

Compare this to what SD Shibulal, CEO and Managing Director, Infosys, had to say: "The year ahead looks challenging for the IT services industry, with slow recovery in the global markets."

There's no surprise then to see TCS shooting up 16% in intra-day trades and closing 12% higher) after announcing its results, while Infosys fell by 13% on the day it released its numbers.

Blaming Infosys for missing the plot, JPMorgan says that the company's inability to walk the pricing versus volume trade-off, and constantly blaming the environment for volatility in its performance have kept investors away from Infosys. Even worse is that analysts have started disbelieving the Infosys management. In the same report JPMorgan says that the strength of industry demand is moderating, but by no way is it crumbling as mentioned by Infosys.
 

FOURTH QUARTER COMPARISON
	Infosys	TCS
Sales growth (in $ terms)	-1.90%	2.40%
PAT growth (in $ terms)	1.10%	1.60%
Clients added	52	42
Net employee addition	4906.00	11,832
Utilisation rate	70.70%	71.30%
Guidance	8-10%	>11-14%

By painting a dismal picture, Infosys can at least try to push through its plans of declining pay hikes to its employees. TCS has, in fact, gone on record saying that it will hike salaries by 8%.

TCS, by virtue of being a Tata group company, has always been a trend-setter making enough investment for future. Apart from taking a lead in patent filing, TCS has also invested its resources in developing IT infrastructure in India. Infosys on the other hand has been visibly missing in its presence in India.

At the time of announcement of its fourth quarter results, the market was ripe with rumours that Infosys might avoid giving guidance. By giving out a number and then trying desperately to justify it at the time of its results, the company is cutting a sorry face for itself. TCS, on the other hand, gives a broad guidance, like this time around it said that it might grow above the industry average. The industry is expected to grow between 11-14%, anything over that is TCS' number. 

Unfortunately, Infosys has lost this luxury too as this time around its guidance of 8-9% is well below industry average.

It's time the bellwether crown shifts to TCS.