Analysts credit stater acquisition for Infosys posting better numbers than TCS

Infosys reported $3.21 billion of revenue in the September quarter, against $5.52 billion by TCS.

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Another analyst pointed out that Infosys had “gotten its act together” and that under chief executive Salil Parekh, the company had stopped the infighting that had hurt it during the term of former CEO Vishal Sikka.
BENGALURU: Analysts are crediting an acquisition for Infosys’ better than-expected performance in the July-September quarter, when the IT services firm outpaced larger rival Tata Consultancy Services in revenue growth.

Excluding the incremental revenue from Stater, the mortgage services unit of ABN AMRO Bank, that it acquired earlier this year, Infosys’ revenue growth from the banking and financial services (BFS) segment underperformed compared to TCS, they said.

BFS is one of the biggest revenue segments for Indian IT companies like TCS, Infosys and Wipro. On Thursday, Mumbai-headquartered TCS reported a muted performance in the retail and banking serves segments, even as its revenue underperformed expectations.


Infosys, on the other hand, on Friday posted strong growth in banking and financial services and raised the bottom-end of its revenue target for fiscal 2020 — its new forecast is for 9-10% growth, compared with 8.5-10% earlier.

“If you peel off the inorganic contribution from Stater for Infosys, the June 2019 year-on-year organic constant currency growth of Infosys was approximately 9.3% (vs TCS at 9.2%, on a much bigger base) and the September 2019 year-onyear organic constant currency growth of Infosys was below 6.0% (vs nearly 8% for TCS),” said Peter Bendor-Samuel, CEO of IT advisory Everest Research.

“So, barring one acquisition, which is more of a one-off, Infosys’ financial services has actually underperformed that of TCS (and that too on a smaller base),” Bendor-Samuel added. Infosys reported $3.21 billion of revenue in the September quarter, against $5.52 billion by TCS. In March, Infosys bought a controlling stake in Stater for Rs 1,000 crore. Despite being queried on the contribution of Stater to the results, Infosys said it would not provide the breakout.
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Another analyst pointed out that Infosys had “gotten its act together” and that under chief executive Salil Parekh, the company had stopped the infighting that had hurt it during the term of former CEO Vishal Sikka. Also, its focus on digital has helped the company.

“Infosys has stepped up to take the mantle of being the most digitally focused Indian-heritage provider (a void created by Cognizant in recent times). That has proved highly appealing to both BFS and North American clients,” HfS Research CEO Phil Fersht said.

“I would also add Salil Parekh’s very strong relationships in BFS has been a major plus and Ravi Kumar’s exceptional leadership in the US to expand the delivery organisation and align with client needs.” Ravi Kumar is the US-based president and deputy chief operating officer at Infosys.
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