Infosys reported a muted set of numbers for the December 2017 quarter. Sequential revenue growth was 0.8 per cent in constant currency terms. On year-on-year basis, it was 5.8 per cent.

There was though nothing great to write home about TCS’ numbers either, it fared only slightly better in overall revenue growth sequentially (1.3 per cent) and year-on-year (6.2 per cent)

Infosys kept its revenue guidance for 2017-18 unchanged at 5.5-6.5 per cent.

But it was only in the last quarter that the guidance was revised downwards from 6.5-8.5 per cent.

The company added 79 new clients, but there werew only a few additions in the large buckets of $100 million-plus (1 new client) and $50 million-plus (3 new clients).

The contribution from the top 25 accounts dipped further in the quarter to 35.3 per cent. This was 36 per cent in the September 2017 quarter and 36.3 per cent in the December 2016 quarter.

With Salil S Parekh having taken over as MD and CEO, market hopes that the uncertainty within Infosys ends, but one needs to still watch out on senior management attrition in the coming months.

Growth across verticals were weak.

The BFSI segment (that contributes over a third of revenue) reported a growth of mere 0.1 per cent in constant currency terms, sequentially. The manufacturing and hi-tech segment saw growth drop 0.1 per cent.

Among geographies, North America — the largest — grew just 0.7 per cent in constant currency terms.

Operating profit margin was 24.1 per cent down by 10 basis points from the previous quarter.

TCS had reported a 10 basis points improvement and its margins were 25.2 per cent.

Outlook

It looks like all Indian IT bellwethers are going to face a tough time till the BFSI segment in the US revives.

The valuation gap between Infosys and TCS, which historically was 15 per cent, hit 24 per cent in the September quarter.

The gap narrowed little bit after the Infosys’ new CEO came in, but it is still at about 20 per cent.

But given that Infosys hasn’t given much comfort to investors in its December quarter numbers, the valuation gap may continue to exist.

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