The opinion on the street is unanimous for IT sector Infosys is an underperformer, HCL Technologies a dark horse and TCS a consistent outperformer. This has been the view for several quarters now. Infosys’s problems are company specific and clearly the strategy of preserving margins at the cost of revenue growth has backfired.
The EBIDTA margins of Infosys in Q4 slumped to an all-time low of 23.6 percent from 31.07 percent in September 2009, best in the industry at that time. In the same period (Sept 2009 Mar 2013), HCL Tech’s margins improved by 570 basis points to 21.33 percent, close to its all-time high margins of 22.19 percent in the previous quarter.
Infosys has also lost its market share to rivals like HCLTech, TCS and Cognizant. It has been criticized for not utilizing its huge pile of cash reserves for acquisitions compared to HCL Tech and TCS who have acquired several companies in last few years. The margins of Infosys will further contract as the company is now focusing on stepping up revenues but analysts feel it’s a little too late.