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Tuesday 18 April 2017

TCS: the race to $20b ... and £2b

logoIf Mumbai-headquartered offshore services market leader TCS could just keep up the pace for another couple of years, it would be within cooee of becoming a $20b revenue company by organic growth alone, a full year ahead of the ‘aspirational’ $20b-by-2020 target set two years ago for Infosys by CEO Dr Vishal Sikka.

But that is far from being a ‘done deal’. TCS’ headline revenue growth slipped for the third successive year to 6.2% in FY17 (to 31st March 2017), to reach $17.6b. TCS is still over 70% larger than the $10.2b revenue Infosys, but with a slightly slower growth rate. And like its Bangalore-based rival, TCS is fighting hard to maintain its grip on operating margins, which eased 80bps to 25.7%, though still a full point ahead of Infosys.

But at 9.4% growth, TCS’ headcount, which now stands at over 387k employees, is still rising faster than revenues. Infosys has done better, it must be said, recording 3.3% headcount growth, now just topping 200k employees.

More likely is for TCS to become the first £2b Indian pure-play in the UK market. Our preliminary estimates show TCS with UK revenues close to £1.9m in FY17, about 8% higher than the prior year. At current course and speed TCS could breach the £2b barrier in the current FY, firmly cementing its status as a Top 5 player in the UK software and services market.

But the challenges facing all the Indian pure-plays are unrelenting – declining growth, increasing headcount, tighter margins. As usual, we will explore these challenges and their implications in more detail in the next edition of OffshoreViews.

Posted by Anthony Miller at '18:11' - Tagged: results   offshore  

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