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TCS vs Infosys: In the digital era, everyone has a vested interest in technology. Upgrading and upskilling oneself digitally is at its peak. So is the investor’s interest in investing in the top IT companies in the country.

When we say top IT company the two big names that come to our mind are Infosys and everyone’s favorite TCS. In this article on TCS vs Infosys, we will take a closer look at the fundamentals of the company. Keep reading to find out!

Industry Overview

The IT industry is one of the most important industries in the country in terms of contribution to the GDP as well as employment generation. In India, the industry accounted for 8% of the GDP in 2020. 

Further, this industry is expected to contribute 10% to India’s GDP by 2025. The IT & business service industry’s revenue was estimated at US$ 227 billion in FY22 from US$ 196 billion in FY21.

Business Overview

Tata Consultancy Services

Tata Consultancy Services | TCS Vs Infosys

Tata Consultancy Services is an IT services, consulting, and business solutions organization. A part of the Tata group, India’s largest multinational business group, TCS has over 600,000 of the world’s best-trained consultants in 46 countries.

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It is a part of key indices like NSE, BSE as well as foreign indices like the MSCI Global Sustainability Index and the FTSE4Good Emerging Index.

The key business verticals for Infosys are financial services, retail, communication, energy & utilities, and the life science and healthcare division. It is the second-largest company in India with a market capitalization of Rs 11,56,681 crores.

Infosys

Infosys | TCS Vs Infosys

Infosys is one of the leading Indian IT services companies offering traditional and digital IT and consulting services. The company’s digital services-related capabilities in cloud computing, the internet of things (IoT), big data and analytics, and artificial intelligence (AI) are ranked the best in the industry.

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The key business verticals for Infosys are financial services, retail, communication, energy and utilities, and manufacturing.  It is the fourth largest company in India with a total market capitalization of Rs 6,31,164 crores.

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Financial Metrics

After understanding their business, we will have a look at the key financial metrics of both companies.

Tcs VS Infosys: Revenue

In FY22, TCS earned a revenue of Rs 1,91,754 Cr whereas Infosys was able to earn Rs 1,21,641 Cr. In the last five years, from 2017 to 2021, revenue for Infosys and TCS grew at a CAGR of 11.5% and 9.2%, respectively.

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The revenue growth for Infosys was backed by its technology, energy, and utility business verticals. On the other hand, the revenue growth for TCS was led by the life science and healthcare division of the conglomerate.

Revenue (Rs in Cr)     
20182019202020212022
TCS123,104146,463156,949164,177191,754
(Revenue growth in %)4.40%19%7.20%4.60%16.79%
Infosys705228267590791100472121641
(Revenue growth in %)3.00%17.20%9.80%10.70%21%

Tcs VS Infosys: Profitability

The margins of both companies have grown over the last five years. It can be attributed to the consistent revenue and low cost incurred by them.  For TCS, their operating margin continued to be industry-leading. Whereas, the operating margin for Infosys was reduced by 2 points. 

Margin ratios (Rs in Cr)     
20182019202020212022
Gross Profit Margin (%)
TCS29.3729.9129.7530.2629.76
Infosys31.4827.8827.6129.9427.77
Operating Margin (%)
TCS27.7328.5127.527.7827.36
Infosys28.8425.4524.4226.6924.91
Net Profit Margin (%)
TCS21.0221.5520.6719.8320.05
Infosys22.8318.6418.3319.3318.20

Tcs VS Infosys: How much Are The Investors Earning?

Infosys and TCS have bought back shares worth Rs 304.6 bn and Rs 480 bn from the market in three different transactions in the last five years. 

The dividend payout ratio is the ratio of the total amount of dividends paid out to shareholders relative to the net income of the company.

Infosys has a higher payout ratio compared to TCS. Apart from that, the dividend yield by TCS in FY22 is 1.36% per share whereas the yield for Infosys is 2.06% per share in the year. 

TCS has a good average ROE for the last 3 Years of 39.65% and Infosys has an average of 26.67%. 

Return ratios (Rs in Cr)     
20182019202020212022
Return On Equity (ROE)
TCS30.3335.1838.4437.5242.99
Infosys24.6823.7125.3525.3429.34
Return On Capital Employed (ROCE)
TCS38.5944.974647.2152.91
Infosys30.9231.8330.8331.7335.96
Earnings Per Share
TCS134.1983.0586.1986.71103.62
Infosys7135.3838.9145.5252.41
Dividend Payout Ratio
TCS3736854341
Infosys5960455959

Tcs VS Infosys: How Does The Valuation Of The Company Look?

The sectoral P/E for the IT industry is 40.66. For the companies in comparison, TCS and Infosys have P/E ratios of 36.25 and 30.03, respectively. 

The price to book value of TCS is higher than Infosys with a value of 12.93 over 8.39. Generally, companies with lower ratios are preferred as per the industry standard. 

Valuation Parameter (Rs in Cr)     
20182019202020212022
PE Ratio
TCS10.6224.1021.1936.6536.09
Infosys7.7620.9916.4629.9936.31
Price To Book Value
TCS6.398.398.1313.6015.35
Infosys3.804.964.157.6110.62
Price/Sales Ratio
TCS4.425.124.367.167.14
Infosys3.503.902.995.786.58

Future Prospects Of The Company

TCS: The pandemic has brought enormous opportunities for TCS. The necessity of technological advancements in all fonts has opened up huge opportunities for the conglomerate.

To stay ahead, it has already invested in research and innovation, upskilling its employees, intellectual property, and partnerships.  In the March 2021 quarter alone, the company secured 30 deals, making it the leader among its peers.

Infosys: Infosys has transformed into a very client-focused company. It is also focusing on forging partnerships with the world’s top companies. Infosys is also investing in designing and developing the right solutions required for accelerating digital transformation.

Apart from that, to cope with the ongoing pandemic, Infosys has made major changes in its own infrastructure to enable seamless work from home for the employees.

The company became carbon neutral in 2020 as a part of its ESG initiative. Infosys, on the other hand, could secure only nine deals in the quarter.

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In Closing

In this article, we looked at the financials of TCS vs Infosys. Both the companies are giving neck-to-neck competition with each other in terms of revenue, growth, and profitability.

The future leadership will be decided based on what strategies they choose to move forward. That’s all for this post. Happy investing!

Which company would you invest in? Let us know in the comments below!

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