If the Indian IT sector has gained the reputation of being boring in the last few years, it is not without justification. There is nothing novel about its business model. It has been tried and tested. All companies largely have the same value proposition, cost structures and revenue streams. Nasscom Chairman and Mindtree CEO Krishnakumar Natarajan often jokes that if you take away the name and logo from the presentations of Indian IT companies, you cannot tell one from the other.
The big questions—and the differentiations—lie around execution. One, whether a company has consistently shown the ability to execute, and two, whether it has pulled the right levers to keep revenues growing and margins stable, and also keep the markets happy.
In the past few years, the companies that have managed to keep the markets happy have done so by pulling one or the other of these levers. For example, Cognizant, which has always maintained its margins at 20 percent, has grown the fastest. Even HCL Tech, which has a lower operating margin, has pursued faster than industry growth (pegged at 10-12 percent) in 2013-14. Wipro has had to struggle with lower growth, and has maintained a low profile, unlike TCS and Infosys.
TCS and Infosys were under constant media glare, albeit for different reasons.
TCS has had a dream run in the last five years. Its share price grew from Rs 250 in January 2009, when the world was still recovering from its worst financial crisis, to Rs 2,158 as of December 20, 2013. The big question around its market cap is not if it will cross $100 billion but when, and what would that mean to the company. Its CEO N Chandrasekaran has been one of the most praised chief executives in the country (also winning the 2012 Forbes India Leadership Award for Best Private Sector CEO). The stock market surge is backed by the company’s performance: Its sales have grown; its profits are up; its profit margins have improved.
(This story appears in the 24 January, 2014 issue of Forbes India. To visit our Archives, click here.)
Good article. Yes. TCS is doing well as a leading Giant in IT field in India. TATAs have a business culture with ethics and TCS is no exception.
on Feb 19, 2015In India all companies are in rat race, they don't care the employee. Giving low salary and annual revision of salary structure is just a joke around. HCL "Employee first, customer second" anthem is greatest antics, it is said yes because Employee always come first , when you have to drink blood and earn profit, cut down employee salary , no appraisal, no benefits, perks a dream, that's what employee first. Indian company don't have work culture, politics at the best, and good techie guys have to suffer, govt also don't speak as they are getting money or say bri*e. What a shame is that a pregnant lady get max 10 paid leaves in whole tenure and forced to come office facing all the challenges, if she wants extra leave then company say go on leave without paid,no gregarious nature in IT company, she can't stay in home after birth of child, as she can't want to get release later. IT company has no social responsibly towards employee. Still we have to work as we don't have another option to earn.
on Jan 30, 2014Good article. Yes. TCS is doing well as a leading Giant in IT field in India. TATAs have a business culture with ethics and TCS is no exception. Dr.A.Jagadeesh Nellore(AP),India
on Jan 23, 2014