Q1 IT Review: Deal Wins Aid Revenue For TCS To Wipro But Wage Hikes Bite

A monitor displays a health notice to employees at an entrance to a building at the HCL Technologies Ltd. Jigani campus in Bengaluru, Photographer: Samyukta Lakshmi/Bloomberg

Q1 IT Review: Deal Wins Aid Revenue For TCS To Wipro But Wage Hikes Bite

Revenue of India’s four largest information technology firms rose in the quarter ended June as clients ramped up spending on digital services during the pandemic, but their margins fell as a result of employee wage hikes.

The companies’ outlook was bullish, with Tata Consultancy Services Ltd., India’s largest software services firm, guiding for double-digit growth in the ongoing financial year. Bengaluru-based Infosys Ltd., too, raised its growth guidance for the full fiscal as revenue rose on large deal wins. Its cross-town rival Wipro Ltd. beat its revenue guidance, aided by investments in digital businesses. HCL Tech met estimates for net profit during the same period. Tech Mahindra Ltd. is yet to declare its earnings.

Here’s how TCS, Wipro, Infosys and HCL Tech fared in the April-June period:


The metric rose between 2% and 12% for the four firms in the three-month period, with Wipro’s growing the most and HCL Technologies Ltd.’s the least.

TCS—whose revenue grew 2.4% sequentially in constant currency terms—expects to deliver double-digit revenue growth in FY22, driven by ramp-up of deals, broad-based improvement in IT spending and traction in cloud, cyber security, analytics and enterprise application services.

Infosys has guided for revenue growth of 14-16% year-on-year in constant currency terms for FY22, from 12-14% previously, amid rising demand for digital transformation initiatives. The metric rose 4.8% over the last quarter in constant currency terms. It retained its full-year margin guidance at 22-24%.

HCL Tech maintained its FY22 outlook of double-digit revenue growth and 19-21% expansion in operating margin amid strong order bookings and continuous ramp-up on hiring that could aid normalised growth in the second half of the ongoing fiscal. Revenue, in constant currency terms, grew 0.7% sequentially.

Wipro has guided for sequential revenue growth of 5-7% in the quarter ended September, led by deal wins and impact of its acquisition of U.K.-based consultancy Capco. The company’s revenue grew 12% in constant currency terms amid better-than-expected growth from Capco and its consumer and E&U verticals. Organic growth was led by the consumer and communications verticals, while Capco drove BFSI growth. The company’s gearing for double-digit full-year growth, excluding Capco.

Deal Wins

TCS won total contracts worth $8.1 billion—rising 17% year-on-year—with wins spread across sectors and sizes. The BFSI segment chipped in with $2.2 billion, while the North America market contributed $4 billion. The company expects the deal momentum to continue in the foreseeable future.

Infosys won deals worth $2.6 billion, up 86% over the same period last year. The company said the ramp-up in the number of deals provides strong visibility for FY22.

HCL Tech reported new deal wins worth $1.7 billion—a 37% increase over the same period a year ago. That includes eight large service deal wins and four product wins. The company said its deal pipeline was robust, especially in the services, and products and platforms segments.

Wipro disclosed a total contract value of $715 million, down 49% over the last quarter, amid lack of mega deals. The company has added TCV wins of about $8 billion in the last nine months, data for which is available since the third quarter of FY21. This, the company said, sets it up for double-digit organic growth in FY22.


TCS’ operating margin contracted 130 basis points over the last quarter to 25.5% because of the impact of annual wage hikes and visa costs.

Infosys’ Ebit margin, too, fell by about 80 basis points over last quarter to 23.7% as employee and subcontracting costs rose. The company expects to achieve its full-year margin guidance band of 22-24%.

HCL Tech’s operating margin widened to 19.6% from 16.7% a quarter ago. Analysts expect its margin to face headwinds in the coming quarters as a result of wage hikes and investments in newer geographies and capabilities. The metric may gain some tailwind in the absence of Covid-19-related costs next quarter, but that would be offset by salary hikes.

Wipro’s operating margin dropped by 300 bps sequentially to 17.2%, owing to higher employee costs. The company has maintained its 17-17.5% Ebit margin guidance for FY22. A second round of wage hikes was announced for 80% of its employees from September that may impact the metric in second or third quarter, apart from increased hiring and return of discretionary spends.

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