Infosys, TCS, Wipro Update - Supply-Side Margin Headwinds Continue: ICICI Securities
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ICICI Securities Report
Despite Q3 FY22 being a seasonally weak quarter, Infosys Ltd. and Tata Consultancy Services Ltd. surprised while Wipro Ltd. was below street expectations (though within guidance range).
Robust growth in Europe and optimism around the retail segment for TCS / Infosys were key positives. Growth in verticals such as financial services and manufacturing further aided company performance.
Supply-side cost pressures and drop in utilisations led to margin contractions (10-60 basis points) in all three companies. This was partly offset by higher offshore effort mix and other cost optimisation initiatives.
Attrition increased sharply, by 220-540 bps QoQ (last twelve months), with Infosys / Wipro being the most / least impacted. This is guided to stay elevated for at least another one to two quarters, and gradually flatten out thereafter.
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