Over 5 lakh employees, millions of shareholders, Govt all have big stake in TCS, Infosys….

In their earnings results for the quarter ended September , TCS and Infosys – India’s top two software and service exporters in that order- have delivered numbers which clearly point towards a stress in the IT sector , though it is still considered safe on relative terms. In the market, their shares fall in the safe category.

TCS has earned net profits of Rs 6084.66 crore  and Infosys R s 3398 crore.for the quarter. In their own ways, their managements , headed by N Chandrasekaran  and Vishal Sikka, among the most respected industry leaders,  have given their version but in a way admitted that there have been or there are chances of slippage because the pricing power is diminishing in the wake of difficult markets in the US and elsewhere.

Both of them get bulk of their revenue from the US, Europe and some part of it from China, Japan. All these markets , excepting somewhat better situation in America are battling consumer resistance, meltdown in manufacturing and processing sectors.  That surely has a bearing on their IT spend.

By their sheer size by Indian standards (by global standards, they are ‘ Bachas-kids), we have a big stake in our top IT exporting firms. Betweeen two of them , TCS and Infosys employ 5.23 lakh people, earn Rs 9482 crore …quarterly profits for their millions of shareholders and pay over Rs ten thousand as quarterly tax to the government.   

That is why , each time they have to declare their earnings, there are pre-result forecasts and post-result analysis. Their Public Relations people do not run after news persons for interviews. It is other way round. They filter the interview requests and some time do “favours” to some of us by giving  “exclusive “ interviews which are then splashed in not one by half dozen newspapers and broadcast all the major market channels. Anyhow, no complains. That is how it is !

Since the stakes are so high, concerns remain high whenever there are signs of stress. Thankfully, the leadership of these two firms realise that. I liked the way, Chandrasekaran  fielded the questions by BS and made some admissions about the volume slowing down. In his HT interview, he gave a very good quote which is what makes such companies tick. “ We want to be the most agile startups”.                           

In many ways, TCS does not behave like a typical Tata firm. It is really a global firm in outlook, reading the challenges and coming up with the solutions. The TCS CEO and MD made no bones about maintaining a distinct identity . 

Pics courtesy:  TCS, Infosys 

Infosys must empty its over-filled wallet and invest  

Infosys is sitting over a cash pile of USD 4. 5 billion. About time, India’s IT bellwether invested at least part of it and led investment revival in the country, aspiring high. 

Unlike most of the industries, particularly in manufacturing, well –performing IT service firms have enough cash on their balance sheets but have remained somewhat doubtful about expanding their operations and investment horizon. Infosys is among very few which are enjoying the warmth of cash while bulk of the Indian industry reels under debt.

If there are any sectors still considered somewhat safe for investors in the market, IT firms make the grade there as well. Top five of the Indian IT firms , be it TCS, Infosys or  Wipro …..have all survived market crash, 2008-09 global financial crisis included.

They cater to the best known Fortune 500 corporations, the likes of Apple Inc, Wal-Mart and Volkswagen. The Indian service firms have not only survived worst of economic crises, but also political onslaught in the US against outsourcing . Infosys gets about 63 per cent of its revenue from the US, followed by Europe.

While each time there is an earning season, TCS and Infosys surprise the investors with pleasant results, too much of cash on their balance sheets is not something that presents a forward looking outlook. It is good to be conservative but holding on to liquid assets beyond a point becomes counter-productive and may lead to missed opportunities.

In fact, with this kind of cash, Infosys can scout for some of the best assets in different class of high end technology applications at relatively cheap valuations. And with a tech-savvy CEO in Vishal Sikka , timing should be opportune for Nagavara Ramarao Narayana Murthy- promoted Infosys to go for the kill.  It need not spend the entire corpus at its command , but keeping it in safe wallet may not be a smart strategy.    

India's second-largest software services exporter has  reported a better-than-expected 9.8 percent increase for the quarter ended  September,2015. The company’s emphasis on moving up the value chain did help it .

Infosys posted a net profit of USD 525.07 million) in the September quarter.  

Pic: Infosys Facebook page