The stocks of both Infosys and TCS plummeted on Friday.

Infosys’ dollar revenue growth dropped 1.4 per cent sequentially in the December quarter. The company revised its revenue growth guidance for the full year 2016-17 for the third consecutive quarter. It now expects constant currency growth of around 8.4-8.8 per cent versus 8-9 per cent expected last quarter. Infosys began the year with a 11.5-13.5 per cent guidance for 2016-17.

Revenue from the company’s largest geography- North America, declined 0.6 per cent sequentially (in constant currency terms) in the December quarter, down from 2.7 per cent growth in the September 2016 quarter. The manufacturing vertical reported a decline in revenue and the BFSI segment saw just 0.2 per cent growth in revenue over the previous quarter.

With TCS, though both revenue and margins were above analyst estimates. But the naming of TCS Chairman – Chandrasekaran, as Tata Sons Group Chairman, and elevation of TCS’ CFO- Rajesh Gopinathan as the new CEO of TCS, dampened market sentiments.

The company reported a dollar revenue growth of 0.3 per cent over the September quarter. TCS’ North America market saw a sequential revenue growth of 2.2 per cent, up from 1.4 per cent reported in the September quarter. Both the BFSI and the manufacturing vertical recorded a 2.1 per cent sequential growth.

New clients

Infosys added 77 new clients during the quarter. In the September quarter, it had added 78 clients. Two new clients were added in $75 million plus bucket taking the count to 32. However, revenue contribution from top five clients declined to 12.3 per cent in the December quarter down from 13.1 per cent in the September quarter.

TCS too had managed to add a few large clients. In the $50 million plus bucket, there were two new clients.

Margins

Infosys’ management indicated continued pressure on margins. The revenue productivity per employee declined 3.3 per cent in constant currency terms in Q3 compared to the same period last year. However, thanks to operational efficiency and focus on automation revenue per employee went up to $51,900, said the company. Operating profit margin of the company was 21.5 per cent, up 21 basis points sequentially. Attrition declined 80 basis points sequentially and was reported at 14.9 per cent. Utilisation declined marginally compared to the previous quarter, but, at 81.9 per cent, it was the highest recorded in many years in an otherwise seasonally soft third quarter.

TCS reported operating margin at 26 per cent, flat year on year. The company’s management guided a range of 26-28 per cent on operating margin for the full year.

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