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18 August 2021 Sector Update
Information Technology
HSIE Research is also available on Bloomberg ERH HDF <GO> & Thomson Reuters
’Hit Refresh’ The IT sector narrative remains positive and the various dashboards and
metrics substantiate the progression. The growth outlook is strong with
improving probability of sustained momentum, despite the transient supply-
side challenges. We ‘hit refresh’ on the previous quarter metrics across the
value chain of our coverage universe. Some of the key observations include:
(1) strong momentum/resilience in mid-tier IT (outperformance vs. tier 1s on
revenue/margin), which is likely to continue, based on the deal bookings
trajectory; (2) slight moderation in tier 1 deal TCV share in Jun-quarter
compared to global peers, concurrent with increased growth guidance of
global competitors; (3) positive commentary and drivers for software product
development and ER&D, supported by IT-OT integration, digital twin and
ESG leading to increase in deal size and industry consolidation/inorganic
(latest being Akka Tech); (4) our deal tracker data indicating an uptick in the
E&U vertical and continuity of strong bookings across the BFSI, healthcare
and manufacturing verticals; and (5) an increasing number of larger (multi-
year) cloud deals (Azure, AWS), channel expansion (Google Cloud) and
strong growth in leading cloud platforms.
The supply-side inflationary scenario (an industry-wide phenomenon) has
intensified and attrition (LTM) increased >250bps QoQ, but we believe that
these are transient (likely to taper in 1-2 quarters), based on certain
interventions, anecdotal evidence, and historical trends. There are multiple
levers/interventions (and their inter dependencies) to defend margins against
the inflationary impact, which include pricing increase (mid-year revision),
further increase in offshore mix (supplemented by extension of return to
workplace timelines), scope for pyramid restructuring, and training intensity
to support faster deployment of billable resources. Other inter dependencies
include profitability focus, supported by staffing concentration in strategic
accounts (uptick in USD 100mn+ & USD 10mn+ cohort) and accounts with
better margins, in turn supported by strong demand. Mid-tiers do face a
bigger hurdle on the supply-side on higher sub-con/lateral dependence and
an inflationary gig environment (mid-tier IT sub-con increased 19% QoQ as
compared to 11% for tier 1s).
Key hits & misses: IT sector’s aggregate performance was largely in line,
with 0.4/0.6% variance in revenue/APAT as compared to preview estimates,
but the zoom-in to details bring out the interesting stuff. The tier 1 IT
revenue outperformance was led by Wipro, TECHM and Infosys while TCS
and HCLT were in line to lower then our estimates. Within mid-tiers, the
revenue outperformance was more pronounced and broad-based
(compared to concentrated pockets in Q4), led by PSYS, MPHL, Mindtree
and Zensar.
Outlook and valuations: The YTD EPS upgrades (consensus) have been led
by mid-tiers such as TELX, Mindtree, Mastek and PSYS, ranging from 20-
40% and, within tier 1, by Wipro (~15%). We expect the sector (coverage
universe) to post 13% and 14.5% USD revenue/APAT CAGR over FY21-24E
compared to 6.5/7.5% over the past five years. The mid-tier valuation
premium relative to tier 1s may sustain, based on its relative
outperformance (>500bps growth outperformance over FY21-24E as
compared to 250bps earlier). We roll over valuations to Sep-23E and
increase target multiples for most of the companies in our coverage
universe. We remain broadly constructive across the sector and ahead of
consensus on growth/EPS; our preferred picks are Infosys, HCLT, Mphasis
and Zensar.
Company CMP
(INR) RECO
TP
(INR)
TCS 3,553 ADD 3,775
Infosys 1,742 BUY 1,780
Wipro* 635 ADD 665
HCL Tech 1,143 BUY 1,230
TechM* 1,414 BUY 1,530
LTI* 4,959 ADD 5,020
Mindtree* 3,017 ADD 3,035
Mphasis* 2,842 BUY 3,300
LTTS* 3,825 REDUCE 3,035
Tata Elxsi 4,715 REDUCE 4,400
Persistent 3,212 ADD 3,420
Cyient* 953 ADD 1,100
Zensar 457 BUY 525
Sonata* 890 BUY 950
Mastek 2,499 BUY 2,930
*CMP as on 17th Aug 2021, * Multiple change
from last update, TP based on Sep-23E EPS
Amit Chandra
[email protected]
+91-22-6171-7345
Vinesh Vala [email protected]
+91-22-6171-7332
TCS
INFY
HCLT
WPRO
TECHM
LTIMPHL
LTTS
MTCL
TELX
PSYS
CYL
ZENT
SSOF
MAST
5
10
15
20
25
30
35
40
45
50
5 10 15 20 25 30
P/E
(x)
FY
23E
EPS CAGR % (FY21-24E)
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IT: Sector Update
Contents
Q1FY22 Financial performance ..........................................................................................3
Indian IT management commentary .................................................................................6
Change in estimates............................................................................................................ 14
Valuation metrics ................................................................................................................ 17
BFSI Tech spend .................................................................................................................19
Commentary by large global enterprises ....................................................................... 20
Vertical performance dashboard ...................................................................................... 22
Services performance dashboard ..................................................................................... 27
Deal wins during the quarter ........................................................................................... 33
Inorganic activity ................................................................................................................ 36
Revenue and margin performance charts ....................................................................... 38
Valuation charts .................................................................................................................. 41
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IT: Sector Update
IT Services: Q1FY22 Quarterly Financial Summary
Company
NET SALES (USD
mn)
NET SALES (INR
bn) EBIT (INR bn) EBIT Margin (%) APAT (INR bn) Adj. EPS (INR)
Q1
FY22
QoQ
(%)
YoY
(%)
Q1
FY22
QoQ
(%)
YoY
(%)
Q1
FY22
QoQ
(%)
YoY
(%)
Q1
FY22
QoQ
(bps)
YoY
(bps)
Q1
FY22
QoQ
(%)
YoY
(%)
Q1
FY22
4Q
FY21
1Q
FY21
TCS 6,154 2.8 21.6 454.11 3.9 18.5 115.88 -1.2 28.1 25.5 -133 191 90.08 -2.6 28.5 24.4 25.0 18.9
Infosys 3,782 4.7 21.2 278.96 6.0 17.9 66.03 2.5 23.1 23.7 -81 100 51.95 2.3 22.7 12.4 12.1 10.1
Wipro* 2,415 12.2 25.7 182.52 12.4 22.4 31.41 -5.6 22.5 17.2 -328 2 32.32 8.7 35.2 5.9 5.4 4.4
HCLT 2,720 0.9 15.4 200.68 2.2 12.5 39.31 -1.2 7.4 19.6 -67 -93 32.14 8.5 9.9 11.8 10.9 10.8
Tech M 1,384 4.1 14.6 101.98 4.8 12.0 15.45 -3.6 68.5 15.2 -133 508 13.53 19.5 39.2 15.4 12.9 11.1
Tier-1 IT 16,454 4.3 20.4 1,218.25 5.4 17.3 268.08 -1.0 24.4 22.0 -142 125 220.02 2.9 25.5
L&T Infotech 470 5.1 20.5 34.63 5.9 17.4 5.68 -10.2 10.6 16.4 -295 -101 4.97 -1.1 19.3 28.5 28.8 23.9
Mindtree 311 7.7 22.6 22.92 8.6 20.1 4.06 3.8 54.9 17.7 -82 399 3.43 8.2 61.2 20.8 19.3 12.9
Mphasis 363 6.0 18.8 26.91 6.6 17.6 4.27 5.4 19.2 15.9 -19 21 3.40 7.2 23.5 18.2 17.0 14.8
L&T Tech 206 4.2 20.3 15.18 5.4 17.3 2.62 9.7 67.4 17.3 68 517 2.16 11.2 84.5 20.7 18.6 11.2
Tata Elxsi 76 6.4 43.2 5.58 7.7 39.4 1.38 -11.9 68.6 24.7 -551 428 1.13 -1.6 64.6 18.2 18.5 11.1
Persistent 167 9.2 27.3 12.30 10.5 24.1 1.67 13.7 61.9 13.5 39 316 1.51 9.8 68.0 19.8 18.0 11.8
Cyient 144 -4.3 9.9 10.58 -3.2 6.7 1.39 0.4 171.6 13.1 47 797 1.15 3.7 41.3 10.5 10.1 7.4
Zensar 127 5.8 1.6 9.37 6.9 -1.2 1.30 0.2 32.8 13.9 -93 356 1.01 11.6 38.9 4.4 4.0 3.2
Sonata^ 45 1.6 21.9 12.69 17.9 33.2 0.91 -2.8 34.2 7.2 -153 5 0.87 4.4 73.7 8.3 8.0 4.8
Mastek 70 6.5 38.2 5.16 6.9 33.8 1.03 7.6 81.4 20.0 14 524 0.69 14.4 71.4 24.3 21.3 14.2
Mid Tier - IT 1,977 5.2 20.1 155.32 7.1 18.5 24.32 0.1 39.0 15.7 -109 231 20.33 5.4 42.7
Aggregate 18,431 4.4 20.4 1,373.57 5.5 17.4 292.40 -0.9 25.5 21.3 -139 136 240.35 3.1 26.8
Source: Company, HSIE Research, *Wipro IT services USD revenue (organic growth of 4.8% QoQ) and IT services EBIT margin at 19% (-200bps/-4bps
QoQ/YoY), ^Sonata IITS USD revenue and IITS EBITDA margin at 21.3% (-115bps/-104bps QoQ/YoY)
IT Services: Q1FY22 Actual vs. HSIE Preview estimates
Company
NET SALES (USD mn) NET SALES (INR bn) EBIT (INR bn) EBIT Margin (%) APAT (INR bn)
Q1FY2
2
Q1FY22
E
%
Change Q1FY22 Q1FY22E
%
Change Q1FY22 Q1FY22E
%
Change Q1FY22 Q1FY22E
bps
Change Q1FY22 Q1FY22E
%
Change
TCS 6,154 6,204 -0.8% 454.11 457.26 -0.7% 115.88 118.43 -2.2% 25.5 25.9 (38) 90.08 93.77 -3.9%
Infosys 3,782 3,738 1.2% 278.96 275.52 1.2% 66.03 65.88 0.2% 23.7 23.9 (23) 51.95 52.10 -0.3%
Wipro* 2,415 2,354 2.6% 182.52 178.05 2.5% 31.41 32.56 -3.5% 17.2 18.3 (108) 32.32 28.84 12.1%
HCLT 2,720 2,754 -1.2% 200.68 202.99 -1.1% 39.31 41.51 -5.3% 19.6 20.5 (86) 32.14 32.86 -2.2%
Tech M 1,384 1,356 2.0% 101.98 99.96 2.0% 15.45 15.09 2.4% 15.2 15.1 5 13.53 12.20 10.9%
Tier-1 IT 16,454 16,408 0.3% 1,218.25 1,213.77 0.4% 268.08 273.48 -2.0% 22.0 22.5 (49) 220.02 219.77 0.1%
L&T Infotech 470 465 1.1% 34.63 34.27 1.0% 5.68 5.71 -0.5% 16.4 16.7 (25) 4.97 4.60 8.1%
Mindtree 311 304 2.1% 22.92 22.37 2.4% 4.06 4.06 0.1% 17.7 18.1 (37) 3.43 3.30 4.1%
Mphasis 363 354 2.4% 26.91 26.11 3.1% 4.27 4.13 3.5% 15.9 15.8 6 3.40 3.28 3.5%
L&T Tech 206 204 0.6% 15.18 15.07 0.8% 2.62 2.28 15.1% 17.3 15.1 216 2.16 1.94 11.4%
Tata Elxsi 76 75 0.5% 5.58 5.56 0.5% 1.38 1.42 -2.6% 24.7 25.5 (79) 1.13 1.14 -0.1%
Persistent 167 161 3.5% 12.30 11.88 3.6% 1.67 1.57 6.2% 13.5 13.2 34 1.51 1.53 -0.8%
Cyient 144 144 -0.7% 10.58 10.65 -0.6% 1.39 1.23 12.5% 13.1 11.6 153 1.15 0.98 17.0%
Zensar 127 124 2.3% 9.37 9.16 2.3% 1.30 1.26 2.8% 13.9 13.8 7 1.01 0.95 5.9%
Sonata^ 45 44 0.6% 12.69 12.11 4.8% 0.91 0.95 -4.4% 7.2 7.9 (69) 0.87 0.77 12.1%
Mastek 70 69 2.0% 5.16 5.07 1.8% 1.03 0.99 4.2% 20.0 19.5 47 0.69 0.69 1.1%
Mid Tier - IT 1,977 1,946 1.6% 155.32 152.24 2.0% 24.32 23.60 3.0% 15.7 15.5 16 20.33 19.18 6.0%
Aggregate 18,431 18,353 0.4% 1,373.57 1,366.01 0.6% 292.40 297.08 -1.6% 21.3 21.7 (41) 240.35 238.95 0.6%
Source: Company, HSIE Research, * Wipro IT services USD revenue, ^Sonata IITS revenue
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IT: Sector Update
Revenue growth trend (YoY CC %) and Guidance Companies Q2FY20 Q3FY20 Q4FY20 Q1FY21 Q2FY21 Q3FY21 4QFY21 Q1FY22 Guidance
TCS 8.4% 6.8% 3.0% -6.3% -3.2% 0.4% 5.9% 16.4% NA
Infosys 11.4% 9.5% 6.4% 1.5% 2.2% 6.6% 9.6% 16.9% +14% to +16% CC in FY22
HCL Tech 20.5% 16.4% 13.5% 1.0% -0.4% 1.1% 2.6% 11.7% > 10% CC in FY22
Wipro 3.8% 3.3% 2.6% -4.4% -3.4% -2.0% 0.5% 21.3% +5% to 7% QoQ CC in Q2FY22
Accenture 7.2% 9.0% 8.0% 1.3% -1.0% 2.0% 5.0% 16.0% +10% to +11% CC for FY21 as compared
to +6.5% to +8.5% CC guided in Q4FY21
Cognizant 5.1% 4.2% 3.5% -2.5% -0.7% -3.0% 2.4% 12.0% +10% to 11% for Q3CY21 and +9% to
10% YoY CC for CY2
Capgemini 5.9% 2.9% 2.3% -7.7% -3.6% -2.4% 1.7% 12.9% +12% to +13% CC in FY22
Atos -5.0% -7.9% 0.6% -4.5% -3.5% -6.3% -5.0% 0.0% NA
IBM services -2.8% -3.3% -3.9% -7.5% -4.0% -9.0% -2.0% 0.0% NA
DXC Tech^ -0.8% -2.0% -6.9% -5.9% -6.1% -14.6% -8.9% -8.0% Organic -1 to -2% YoY for FY22
Source: Company, HSIE Research; Capgemini growth is organic, IBM services (GBS/GTS) & Atos in YoY terms; ^ in USD terms from Q2FY21 onwards
Global IT services commentary
IBM
GBS: (1) Signings and revenue momentum in both business transformation services as well as application
modernisation services, (2) continued momentum in small deals, small deal signings in high-teens, (3) digital
transformation across key practice areas of Salesforce, Workday, SAP
Red Hat: (1) Average GBS deals in Red Hat USD 3.5mn, and (2) 700 GBS Red Hat engagement since the acquisitions.
Supply side: There is a war for talent going on. IBM is investing significantly and bringing thousands and thousands
of GBS practitioners in through the first half.
Focus on: acquisitions, expanding partner ecosystem, changes to go-to-market
Key deals: Verizon, Telefonica, CVS Health, Schlumberger, BoA, BNP Paribas
Cloud revenue of GBS and Cloud & Cognitive software was up 30% and 25% respectively.
Capgemini
Strong demand led by digital transformation, acceleration in cloud and data, structural acceleration in demand for
technology.
Guidance & Deal booking: Revenue guidance upgraded to 12-13% CC (7-8% CC organic as compared to 2.5-4.5%
earlier) for CY21 with inorganic at 5% (4.5% earlier). Book to bill 1.11 in Q2 (1.05 in H1) and strong uptick in S4 bookings
in H1.
Engineering: Capgemini Engineering growth 16% YoY CC (organic with France >20%) and the company is seeing rise
of demand in engineering fuelled by connectivity and softwarisation and the growth of Intelligent Industry. Bigger
deals in the pipeline with the convergence of IT and OT across industries.
Offshoring: 22,800 offshore net increase vs. 1,600 net onshore increase
Key deals: Toyota (managed services), Volvo (engineering), Celcom, Zurich Insurance, Nortura, Saudi Arabia
Monetary Authority, Asahi.
Cognizant
CY21 guidance increased to 10.2% to 11.2% CC (7-8% organic) from 9% to 10% earlier.
Cognizant’s IoT practice USD 600mn in 2021, 2x from 2019 and Digital engineering at USD 1.2bn growing at 30%
Supply side: (1) Attrition increased to 31% (quarter annualized) from 21% in prior quarter 100,000 lateral hiring in
CY21, 30,000 graduate onboarding in 2021 and 45,000 graduates onboarding in 2022. Attrition expected to remain
elevated in Q3 and highest attrition in mid to junior level.
Cognizant is scaling up Microsoft practice with formation of Microsoft business group and 100% increase in MS cloud
certifications.
Key deals: Philips (engineering), Aker Solutions, Centrica (SAP), Mylan/Pfizer.
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IT: Sector Update
EPAM
Growth & guidance: Q2 revenue growth was 35.9% YoY CC and guidance increased to >35% CC (32% organic) for
CY21 vs. 26% organic guided in the previous quarter. EPAM continues to target long term growth at >20% organic.
Pricing & supply side: Pricing dynamics are improving as EPAM is getting mid-year rate price increase unlike the prior
years and greater than usual increase is expected in CY22. On the supply side, there’s prioritisation of staffing with
focus on account level margin and strategic nature of client. While the supply of talent continues to be the major
challenge that is faced by all the players in the sector, EPAM continues to grow rapidly in Central and Eastern Europe
and in India.
Application development and cloud and data integration services are growing post-pandemic very strongly and
driving corporate budgets forward. Additionally, EPAM is seeing very fast expanding demand for software-enabled
business scenarios.
EPAM is seeing progression into new and larger multiyear engagements as customers look in part to fulfill both
engineering demand as well as demand for new collaboration models that bring in greater stake in product design and
product management.
EPAM’s active participation in the MACH Alliance and continuous contribution of over 4,500 employees to open-
source projects, which makes EPAM top services company now in the open-source community and among the top-20
global contributors overall.
DXC Technology
Revenue was down 3.7% YoY organic (GBS organic revenue +2% and GIS organic revenue -9% YoY).
GBS: Within GBS (46% of revenue and 2% YoY organic), Analytics & Engineering grew 13% YoY organic, Applications
was flat and BPS declined 13% organic
Deal wins: (1) Improvement in deal bookings with GBS book to bill at 1.27x (1.20x in prior quarter) and GIS bookings
at 0.98x (0.96x in prior quarter). (2) Book-to-bill in Analytics & Engineering and Applications at 1.32x. 57% of bookings
were new and 43% were renewals. (3) DXC has not faced any issues in getting COLA increase from clients.
Guidance: Q2FY22 revenue growth -1 to -2% organic and FY22 at -1 to -2% organic and medium term (FY24) growth
at +1 to 3% organic.
75% of the leadership at DXC is new in DXC and 50% of the VPs across the company are in DXC within 22 months.
Atos
Business segments trends: Atos’ classic (legacy) business segment (~54% of revenue) was declining 10% and has
decelerated to 21% in 2021 with decline in legacy infrastructure business. Atos’ non-cloud Apps & BPO has remained
flat over 2018-20 but declining 3-5% in 2021. The strategic units of Atos – Digital, Cloud, Security, Decarbonisation has
accelerated from 10% growth to 15% now.
Medium-term target: Atos has medium term revenue growth target of 5-7% CC 2025
Deal bookings: Book to bill improved to 1.09x in Q2 as compared to 0.96x in Q1 driven by public sector & defense and
Resources & services verticals. Within geos, Northern Europe led growth in deal bookings.
Most complex migrations are yet to come. As the future remains hybrid multi-cloud, the acceleration requires more
cloud orchestration. Atos’ Security practice grew at plus 40% CC.
Headwinds in H1 was stronger drop than previous years in data centre business and in unified communication
Atos is currently hiring at full speed to face demand in application and digital spaces and expect to increase more
significantly its headcount in H2. Attrition at 16.8% with offshore attrition at 22.8%
Key deals: Flemish Govt, EY, Department for Work and Pensions, Pierre Fabre.
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IT: Sector Update
Indian IT management commentary: Q1FY22
Company Management Commentary post Q1FY22 HSIE View
TCS
BFSI: (1) BFSI growth was powered by increasing investments and enhancing
customer experience, product innovation, cloud transformation and optimization of
core operations.
1) We have factored in USD
revenue growth of
15.8%/10.5%/9.3% for FY22/23/24E
with 2QFY22 at 3.5% QoQ. EBIT
margin for TCS is factored in at
25.8%/26.6%/26.9% for
FY22/23/24E.
2) Valuations are at 34/30x
(FY22/23E) with FY21-24E EPS
CAGR at 14%.
3) Our target price of INR 3,775
(ADD) is based on 30x Sep-23E
EPS.
Retail: (1) The growth in the retail vertical was aided by recovery in discretionary
retail as well as parts of travel and hospitality segments in major markets. (2) Travel
& transportation showing signs of recovery in America however company is
witnessing penetration into newer traditional segments like rail and other areas.
Life Sciences & Healthcare: (1) Company developed the TCS ADD Safety platform
for a U.S. based global top 15 pharma company for their safety case management
automation program. (2) TCS ADD Safety will transform the pharma company’s
adverse event case intake and processing using AI, thus improving efficiency and
accuracy in the pharmacovigilance processes.
Technology: (1) TCS is partnering to develop pilots proving the efficiency of the
technologies and to help clients achieve their sustainability goals. (2) The second
wave disrupted technology initiatives in several of the emerging markets, especially
in India. (3) TCS will build smart mobility solutions to improve customers digital
journey enabled by the native capabilities of the cloud. (4) TCS will leverage its
domain knowledge and experience to create micro services architecture on a leading
hyperscaler cloud platform to enhance the retail client experience.
TCV wins: (1) TCS deal momentum continues to be strong at USD 8.1bn during the
quarter (2) There was heterogeneous mix of deals of all sizes and distributed across
industry verticals and geographies. (3) By vertical, BFSI had a TCV of USD 2.2 bn
while retail vertical again achieved its all-time high order book of USD 1.5 bn for the
second consecutive quarter. (4) The TCV of deal signed in North America stood at
USD 4bn. (5) TCS signed up its largest SaaS deal for TCS BaNCS till date with one of
the largest financial groups in Finland for their retail consumer lending business
spanning origination, servicing of accounts and deposits, corporate SME and
unsecured loans. (6) Deal tenure has increased with some of the cloud and large-
scale technology confirmation deal. (7) Over half of the deals are for the SaaS
version of the product.
Headcount: (1) TCS had an all-time high net addition of 20,409 employees during
the quarter, bringing the total headcount to 509,058. (2) Company continues to
invest in building the next generation G&T workforce. (3) Company's investments
in organic talent development resulted in employees logging over 10 million
learning hours in Q1 or 407,000 employees are now trained on multiple new
technologies and have 19,000 contextual masters in the company. (4) Attrition in IT
services was at 8.6%, which is still the lowest in the industry. (5) TCS hired close to
40,000 trainees in FY21 from the campus and would even do more numbers in FY22.
Outlook: (1) In the longer term, structural margins to be sustained for the full year.
Others: (1) Ignio, the cognitive automation software signed up 17 new customers
and had eight go lives. (2) TCS BaNCS, the flagship product suite for financial
services domain had five new wins.
and five go lives in Q1 (3) Quartz Blockchain platform had two new wins in Q1 and
also launched a new product Quartz for Markets, which helps market infrastructure
institutions, offer next-generation
services around tokenized security.
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IT: Sector Update
Company Management Commentary post Q1FY22 HSIE View
Infosys
BFSI: 1) Large part of the growth comes from North America and sub-segments like
banking, mortgages and wealth & determines services. (2) There has been delay in
ramp up & banking plans in Europe. (3) Growth is led by US, especially in software
sub-segments, like banking, mortgages, and wealth and retirements services. (4)
There has been strong start to the financial area with large deals in Q1. (5) There
were nine large deals in the financial services vertical in Q1. (5) Industry-leading
performance in financial services continued with steady increase in growth
momentum, aided by signings during the quarters.
1) We remain positive on INFY
(top pick in tier-1 IT) with >13%
EPS CAGR and >40% RoIC.
2) We have factored in USD
revenue growth of 17.7/15.0/11.6%
for FY22/23/24E with Q2FY22 at
5% QoQ. EBIT margin is factored
in at 23/23.1/23.5% for
FY22/23/24E.
3) Valuations are at 29x FY23E
(similar to TCS) with FY21-24E
EPS CAGR at 13%.
3) Our target price of INR 1,780
(BUY) is based on 28x Sep-23E
EPS.
Retail: (1) Performance of the retail segment improved meaningfully with both new
signing during the quarter as well as ramp up of previous deals. (2) Company has
won four deals in Retail verticals.
Communication: (1) Communication segment performance improved compared to
the previous quarter with the combination of signings and ramp up of one deal.
Manufacturing: (1) Manufacturing segment was strong with title wins from deal
went in the past three quarters. (2) Increased spending on digital in areas like
industrial IoT, cloud option, IT-OT integration are making the manufacturing value.
Headcount: (1) INFY had net headcount increase of 8,000 attracting leading talent
from the market. (2) Company intends to have 35,000 freshers which is above the
earlier guidance of 25,000. (3) INFY already hired 8,000 freshers despite higher
attrition in Q1. (4) Fundamentally INFY will continue feeding the rising demand,
with the fresher, the subcons and the lateral intake. (5) Company will hire 3,000
freshers outside India. (6) INFY expects attrition to be high in the near term due to
strong demand.
TCV: (1) INFY won 22 large deals in Q1, totaling USD 2.6 billion, nine were in
Financial Services, four each in Retail and E&U, and one each in communication,
Hi-tech and Life science segments. (2) Region-wise, fourteen were from Americas;
five were from Europe, two from the rest of the world and one from India. (3) Over
30% of the large deal wins were net new in Q1. (4) INFY is working with many of
the clients on cloud migration, cloud management, and other cloud-related platform
deals.
Guidance: (1) INFY has increased revenue growth guidance to 14% to 16% in
constant currency for FY22 (vs 12% to 14% earlier). (2) Operating margin guidance
maintained for FY22 at 22% to 24%.
HCL Tech
IT & BS: (1) IT and business services was flattish sequentially but remained very
healthy YoY at 13% growth. (2) Both in the bookings and in pipeline of the ITBS
business, company continues to see convergence of infrastructure and application
businesses as integrated deals. (3)
1) We have factored in USD
revenue growth at
+11.6/10.8/10.7%, IT&BS growth at
+13/11/11%, ER&D growth at
+11/12/12%, and P&P growth at
+4/7/7% over FY22/23/24E
respectively.
2) EBIT margins are estimated at
20.0/20.5/20.5% over the same
period, translating into an EPS
CAGR of 13% over FY21-24E
(TCS/INFY/WPRO at 14/13/15%
CAGR).
3) Valuation at 20x FY23E is
inexpensive with ~6% FCF yield
and 25% RoIC.
4) Our target price of INR 1,230
(BUY) is based on 20x Sep-23E
EPS.
ER&D: (1) HCLT witnessed big positive for the revenue momentum in Engineering
and R&D Services both in Europe and Americas, led by Digital Engineering
demand in Hi-Tech as well as Life Sciences. (2) There are green shoots of growth
from the asset-heavy industries as well. (3) The outlook for ER&D Services looks
strong in the upcoming quarters.
P&P: (1) Renewal rates in the P&P segment remains very healthy with net value
capped at above 100%. (2) With regard to the P&P business, company continues to
see growth both QoQ and YoY in the new license booking. (3) The pipeline
continues to have a positive trajectory in the P&P business as well. (4) In P&P
business, company is about to launch HCL Now, which unlocks the full potential of
HCL's products and service capabilities on a cloud platform of clients choice. (5)
Outlook was to grow low single-digit this year in the P&P business on a year-on-
year basis.
Technology: (1) Company continue to see acceleration in Cloud business, reflected
in the multi-year deals covering themes like Migration, and Implementation of
Cloud Smart Strategy, Management of Large Hybrid Cloud Landscapes, Cloud
Consulting, etc.
Page 8
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IT: Sector Update
Company Management Commentary post Q1FY22 HSIE View
TCV: (1) HCLT continues to have very robust pipeline, highest ever, and continued
the strong booking momentum in Q1; this quarter's booking came in at USD 1.66
billion of total contract value (TCV). (2) Some recent large deals company
announced in the Cloud and Digital space are those with the Mosaic company, the
Fiskars Group, McLaren Health Care, Hitachi, ABB Power Grids and UD Trucks. (3)
HCLT closed at least 15 integrated deals and the momentum is picking up which
are multi year deals. (4) Company witness acceleration in Cloud business, reflected
in the multi-year deals covering themes like Migration, and Implementation of
Cloud Smart Strategy, Management of Large Hybrid Cloud Landscapes, Cloud
Consulting.
Headcount: (1) The milestone bonus – 10 days of salary - was a one-time bonus paid
to employees to commemorate achievement of the 10 billion milestones. (2) HCLT
has a wage cycle, which starts in July, and last year there was a three-month delay,
but this year the company expects to provide wage hikes as per the regulatory cycle.
(3) Company has introduced several special programs to enable hiring, grooming
talent, etc., these are led by increased offshoring for which the company is not only
depending on India, but also looking at additional countries like Sri Lanka,
Vietnam, and the Philippines, where it could significantly scale up this year as well
as over the next three years.
Outlook: (1) HCLT expects to grow in double digits in constant currency terms in
FY22. (2) Company expects a strong quarter in Q2 and normalized growth in the
second half.
Wipro
BFSI: (1) The demand in the BFSI sector has remained strong across all service
offerings in Q1.
1) We have factored in
+25.8/+11.1% USD revenue
growth for FY22/23E respectively,
which implies Q2-Q4FY22 CQGR
of 3.4%.
2) The IT services EBIT margin is
factored in at 18.2/18.5% for
FY22/23E, resulting in an EPS
CAGR of 14.7% over FY21-24E.
3) Our target price of INR 665 is
based on 24x Sep-23E EPS (~14%
discount to INFY). The stock is
trading at 27.9/24.9x FY22/23E
EPS.
Energy (1) There has been good traction in the market for energy & utility and as
the demand is coming back, the growth will remain a little lumpy. (2) There has
been healthy business in Energy & utilities and is having good pipeline.
Technology: (1) Wipro has been seeing increased demand in New Age offerings like
cloud transformation; the shift to cloud is unmistakable. (2) Company announced a
number of cloud related wins in different industries and geographies last few
months. (3) Wipro intends to make significant announcement about the cloud
business in near term.
Manufacturing: (1) The manufacturing business is recovering slowly.
Headcount: (1) Billable headcount addition during the quarter was the strongest
ever. (2) Wipro intend to own about 6,000 freshers in Q2 itself. (3) Company
announced a salary hike for 80% of the employees, effective September 1st. which
would be second hike in this calendar year. (4) Company will double down on
increasing intake from campuses across the world, as well as re-skilling the existing
workforce and will on board 33% more in FY22.
TCV: (1) Company closed eight large deals, resulting in a TCV of USD 715 mn. (2)
The volume of deals in medium-large, medium and smaller sized deals has been
really good. (3) Over the last two quarters, Wipro had every time one mega deal. (4)
Company continues to increase its participation in deals in the marketplace. (5)
Wipro secured a multi-year, multi-million dollar contract this quarter from a US
based healthcare company to consolidate the entire on premise and cloud
infrastructure operations, as well as end user services, using intelligent to mention.
Guidance: (1) Wipro guided for revenue growth of +5% to 7% in Q2FY22, even at
the lower end of this guidance, company will cross the 10 billion annual run rate of
revenues.
Page 9
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IT: Sector Update
Company Management Commentary post Q1FY22 HSIE View
TECHM
Telecom: (1) 5 G is pretty much now deeply integrated in every single telecom
transformation project to make it even better. (2) 60% to 70% of the new signings are
going to be built around either integrating or enabling the 5G together mind deal
with a scale adoption of the cloud architecture as well as integrator of intelligence
into the network systems, via analytics and data and AI. (3) Order intake on the
telecom and communication starts inching up and may pickup up the pace starting
from FY23 as a whole and this could be a growth accelerate starting from FY22. (4)
In longer term 5G revenues will continue to grow. (5) Framework for 5G is that
TECHM will continue to do transformation work for 5G for the telcos both in terms
of network as well as the digitalisation that is needed for 5G, that it is cloud or on
the systems underlined. (6) TECHM is driving a greater product and product
engineering around 5G.
1) We have factored in USD
revenue growth of
+13.6/11.7/11.2%, factoring in
telecom growth at +11/10.3/11.4%
and enterprise growth at
+15.4/12.7/11% over FY22/23/24E
respectively.
2) EBIT margins are estimated at
15.0/15.9/16% over the same
period, translating into an EPS
CAGR of 16.5% over FY21-24E.
3) Our target price stands at INR
1,530, based on 20x Sep-23E EPS.
The stock is trading at 22.9/19.7x
FY22/23E (~20% discount to tier-1
1Y forward P/E multiple).
Manufacturing: (1) Key verticals like manufacturing and Hi-tech are driving growth
for Enterprise business.
Headcount: 1) Fresher intake will increase significantly in FY22 and will follow the
trend of Q1FY22. (2) Wage hike during the quarter negatively impacted margins
during the quarter.
TCV: (1) Large deal wins continue to be robust. (2) Largest BPO deal during the
quarter is for more digital integrated back office provisioning and fulfillment. (3)
Healthcare deal is clearly about hospital modernization or patient care
modernisation. (4) Deal wins continue to be healthy and they are in the range of
USD 0.8 to 1 billion.
Outlook: 1) TECHM reiterates its endeavor to deliver EBIT margin of above 15% for
FY22. (2) Good pipeline and strong momentum will drive the growth going ahead.
LTI
BFSI: (1) BFS growth remained very strong driven by our existing clients as well as
our large deal win announced last quarter, which involved the digital banking
transformation for a largest lending using Temenos T24 platform. (2) Insurance
growth driven by some of the recently added logos, ramp-up of the large deals
announced last quarter as well as the existing clients. (3) Company is witnessing
positive traction with the refined insurance strategy, ongoing growth of the
partnership ecosystem and new leadership driving opportunities in the
marketplace.
1) We have factored in USD
revenue growth of 20.7/18.6/16.6%
and EBIT margin of
17.5/17.7/17.8% for FY22/23/24E
respectively. APAT margin is
estimated at 14.7/14.8/14.9% for
FY22/23/24E.
2) At the CMP, LTI trades at 32.5x
FY23E with an FY21-24E EPS
CAGR at 18%.
3) Our Target Price of INR 5,020
(ADD) values LTI at 30x Sep-23E
EPS, factoring in an 18% CAGR in
revenue/EPS over FY21-24E.
Manufacturing: (1) Decline in manufacturing vertical is due to pass through
revenues included in Q4FY21. (2) Demand environment remains healthy in
manufacturing with continued momentum and opening up of discretionary spend.
(3) Manufacturing, enterprise solution and India all three cuts are impacted by
absence of license revenue in Q1 every year.
Energy: (1) Energy & utility vertical growth was largely driven by good growth in
the utility space. (2) Spends in oil and gas expected to be volatile in near to medium
term. (3) Large deal announced in Q3FY21 with the Global Fortune 500 Energy
company is going as per schedule and company expects to see further ramp-up in
the deal in the coming quarters.
TCV: (1) Company has a strong pipeline, including a strong large deal pipeline. (2)
LTI remains very confident about the large deals that they are currently working on
and are very comfortable at this point in time from a large deal perspective. (3)
Company is seeing deals of all sizes across the spectrum, including large deals.
Headcount: (1) The company has added net of 2,000 people last quarter and net of
2,300 plus people in Q1 as well. (2) Company remained focused on building and
scaling differentiated capabilities to cater to this accelerated demand. (3) The total
manpower stood at 38,298, of which the production associates were 95.1%. (4) Two
salary hikes in two subsequent quarters, seems to be barrier to the margins. (5)
Attrition is definitely has gone up and is a cause of concern for everybody in the
industry. (6) LTI is trying to manage from a supply side perspective and think it's
important for the talent creation engine.
Outlook: (1) Deal pipeline remains healthy, and company will continue the strong
deal momentum. (2) Considering strong start of FY22, LTI is confident that it will be
in the leader’s quadrant for growth in FY22. (3) It expects PAT margin to be in the
narrow band of 14-15 % for FY22.
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IT: Sector Update
Company Management Commentary post Q1FY22 HSIE View
Mphasis
DXC/HP: (1) The contribution of DXC is now reduced to 9% revenue on Q1FY22
basis which is in line with the commentary of basically drop into mid to high
single-digit as a percentage of revenue by end of FY22. (2) Company will have to
continue to work with DXC but there is no guarantee on any customers.
1) We have factored in 18/17/16%
growth in revenue, based on the
growth in the direct business at
30/21/17% and DXC-HP at -44/-29/-
13% for FY22/23/24E respectively,
and factored in the EBIT margin at
15.8/16.8/18.0% for FY22/23/24E,
resulting in an EPS CAGR of 23%
over FY21-24E.
2) Our target price is INR 3,300
(BUY), valuing MPHL at 30x Sep-
23E EPS.
Direct business: (1) Direct Business growth is accelerating on a larger revenue base.
(2) The trajectory of the Direct annual growth is consistently rising, with the
growth topping 32% in this quarter from 7% four quarters back in first quarter
FY21. (3) MPHL continued to prioritize the growth and investment in Direct, the
strong showing has also helped to manage the decline in DXC. (4) Direct pipeline
in Europe is strong, especially with new clients, and expect this region to continue
to be a growth driver for FY22 and beyond. (5) Growth this quarter in Direct was
broad based across most verticals.
BFSI: (1) BFSI representing the fourth straight quarter of 20% plus growth in
Q1FY22. (2) Company believes that YoY growth in BFSI is best in class in the
industry segment and was broad based across sub segments of BCM. (3) Company
continues to enjoy share gains with the key clients in BCM.
TCV Wins: (1) MPHL recorded an all time high TCV of USD 505 million in
Q1FY22, marking it as sixth straight quarter of USD 200 million plus net new TCV.
(2) This quarter's TCV includes the USD 250 million deal that company signed in
this quarter and announced in the last earnings call. (3) There is an increasing
component of larger and longer tenure deals. (4) Deals are transformation led,
integrated, and leverage a multiple deal archetypes and tribes in combination. (5)
There is a heavy new-gen services portion in the net new TCV, with the
contribution of 85% of first quarter deals in new-gen areas.
Outlook: (1) Strong start to the year reinforces the confidence in reiterating MPHL
guidance for the industry leading growth and Direct on top of an industry leading
performance in FY22. (2) Company redeems a stated operating margin band of
15.5% to 18% for FY22. (3) Company expects continued growth in the key clients,
as well the consolidation gains continue to accrue in a healthy spend
environment.
Mindtree
BFSI: (1) BFSI business is returning to growth. (2) The few opportunities in BFSI
which were expected to close took some time for closures, those opportunities are
closed, and that's why company is seeing very good traction and is very confident
that this traction will continue going ahead.
1) We have factored in USD
revenue growth of
+23.2/+15.7/+14.7% and EBITDA at
19.3/20.1/20.3% for FY22/23/24E
respectively. We expect an EPS
CAGR of 16% over FY21-24E and
RoIC of >40% to support the
valuation (33x FY23E).
2) Our target price is INR 3,035
(ADD), valued at 30x Sep-23E EPS
(16% CAGR over FY21-24E over a
high base in FY21 at >70%).
Travel & Hospitality: (1) Things started coming back in terms of domestic travels,
some leisure travel etc. (2) In the travel industry, there is a lot of in the reimagining
of business models like contactless for example is something which is very big in
travel. (3) The investments that MTCL has done in terms of the travel vertical have
given some of the new logos. (4) Company remains cautiously optimistic about the
TTH business, although the client relationship and diversification strategy
continue to drive growth momentum in that sector as Travel and Hospitality
pickup. (5) Global travel management company has chosen Mindtree for a multi-
year end-to-end, AWS cloud migration and cloud operations program to drive its
new business and product strategy.
Technology: (1) The focused execution of the strategy supported by improving
macroeconomic indicators and markets and demand positions Mindtree well as a
strategic partner to clients looking to become agile innovative and technology
driven enterprises.
Headcount: (1) During the quarter company on-boarded a net headcount of more
than 3,400 Mindtree Minds, highest ever in a quarter taking total headcount to
27,000. (2) Continuous learning is the cornerstone of competitive edge in this era of
change hence Mindtree's learn anywhere, anytime approach in delivering quality
learning at scale is bearing fruit with a 86% increase in learning hours sequentially.
(3) Company added 1,000 fresher in Q1FY22. (4) Company is building internal
capability by up-skilling and also building capacity ahead of time by hiring both
the experienced people as well as the freshers.
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IT: Sector Update
Company Management Commentary post Q1FY22 HSIE View
Outlook: (1) Mindtree's focus continues to be on accelerating growth, building
newer capabilities, strengthening the working cause and making the business
model more resilient. (2) Company is witnessing accelerated adoption of
digitalisation across industries and with recovery; company is energised by the
growing scale and scope of transformational opportunities ahead. (3) Pipeline
continues to be strong across industry sectors, ensuring strong start to FY22. (4)
Robust business momentum and operational efficiency programs give Mindtree
the confidence to deliver industry-leading double digit profitable growth in FY22.
(5) Company remains confident on the trajectory of delivering 20% plus EBITDA
margin for FY22.
LTTS
Transportation: (1) Growth during the quarter was led by strong demand in
electrification-led programs and platform development across both Auto and
Trucks and Off highway (2) In the US, there has been infrastructure spending plan
which seeks to accelerate the transition towards electric by investing in a
nationwide charging network. (3) Electric Autonomous Connected Vehicles
(EACV), is one of the six technology focus areas for LTTS. (4) In Q1 company won
two USD 25 million plus deals in Auto both in the EV space, one with a new age
OEM and one with a major Tier-1. (5) In aerospace, the commercial segment is
slowly coming back. Airline manufactures, and operators are spending more on
digital transformation and connected platforms. (6) Overall, for Transportation,
LTTS remains optimistic about the growth momentum continuing across all three
sub-segments.
1) We have factored in USD
revenue growth of
+16.6/+14.9/+15.1% and EBIT
margin at 16.6/16.9/16.9% for
FY22/23/24E respectively. LTTS is
currently trading at 37x FY23E
with the FY21-24E EPS CAGR at
26%.
2) LTTS’ prowess/diversity in
digital ER&D and the overarching
ER&D addressability by assigning
a 1.3x premium to its historical
multiple (1.5x for mid-tier IT) to
factor in the recovery trajectory
and the embedded volatility.
3) LTTS’ valuations are at 39x
FY23E and the stock has
underperformed peers (especially
its ER&D peers). Our Target Price
of INR 3,035 (REDUCE) is based on
28x Sep-23E EPS.
Plant Engineering: (1) Growth in this vertical was driven by FMCG followed by Oil
& Gas and Chemicals. (2) In Oil & Gas and Chemicals, as strategic partners to the
customers, LTTS is working with them across the globe in brownfield expansion,
asset digitisation and asset health monitoring programs. (3) The capex spend
outlook is improving with oil prices going up and a few Oil & Gas majors are
having discussions led by climate change around product mix optimisation as well
as quicker transition to green fuels. (4) Plant Engineering continues to see a good
set of opportunities that will drive growth in the coming quarters.
Industrial products: (1) There was a strong growth across all three sub-segments
showing good growth - Electrical, Machinery and Building automation. (2) The
large account focus with continued demand for product digitisation and
personalisation, shop floor automation and digital twin has been driving the
growth. (3) The pickup in industrial capex and manufacturing activity across US
and Europe should aid the momentum in this segment. (4) There is a good pipeline
and opportunities in Industrial Products; company expects the growth traction to
continue.
Telecom & Hi-tech: (1) There is a good momentum driven by Semi, Consumer
electronics and Telecom. (2) In Telecom, there are huge investments being made in
5G leveraging Open RAN technologies both in traditional telecom as well as Infra-
OEMs as well as some of the ISVs. (3) LTTS recently announced a partnership with
Mavenir, a leading 5G player in network automation. (4) The deal win momentum
has improved in telecom hi-tech, company won two USD 10 million plus deals in
Q1 which gives company confidence of sustained growth going forward.
Medical: (1) The outlook is improving for diagnostic devices with the rising
vaccine penetration in US and Europe. (2) Demand for digital products, platforms
and optimisation of manufacturing processes are key growth drivers in this
segment. Med-tech is another area of focus for the company. (3) Company expects
growth traction to jump from Q2 onwards as the deal traction improves.
TCV: (1) Company won eleven deals across all segments, out of which six deals
was USD 10 million plus and two of these were actually USD 25 million plus TCV.
(2) Large deal pipeline and conversions
remained healthy in Q1FY22.
Guidance: (1) LTTS is confident that the growth will continue to be broad based.
With better line of sight for FY22, company raised its USD revenue growth
guidance to 15% to 17% for FY22.
Page 12
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IT: Sector Update
Company Management Commentary post Q1FY22 HSIE View
Tata Elxsi
Transportation: (1) Transportation business continues to show revival with a 3.4%
QoQ, and a 20% YoY growth during the quarter. (2) Company believes that growth
is faster and possible in the core automotive verticals. (3) The automotive industry
in general has picked up further, which is good and TELX is continuing on the
growth from the previous two quarters. (4) Automotive industry is moving to the
electric vehicles, most companies/ OEM/ suppliers are investing in EV. (5) TELX's
automotive business tends to be a lot more Europe centric. (6) Five of the top 10
OEMs and eight of the top 20 suppliers are TELX customers.
1) We have factored in the USD
revenue growth of 33/21/20% for
FY22/23/24E, factoring in EPD
growth of 27/20/19% and IDV
growth of 96/25/22%.
2) EBITDA margin has been taken
at 28.2/28.8/27.8% for FY22/23/24E,
translating into a 26% EPS CAGR
over FY21-24E. Following the
recent stock performance (50/44%
in 3M/6M), TELX trades at 47x
FY23E.
3) Our TP of INR 4,400 (REDUCE)
is based on 40x Sep-23E EPS
(similar to our bull case scenario at
the time of initiation), supported
by an EPS CAGR of 26% over
FY21-24E.
Media & Communication: (1) Media and communication tends to be a lot more U.S
Centric. (2) In media and communications TELX always treat Accenture as a
primary competition.
Healthcare & Medical Devices: (1) Healthcare continues to grow faster than the
other industry verticals with growth of 19.3% QoQ, and 80.2% YoY. (2) Healthcare
business tends to be a lot more U.S Centric.
TCV: (1) Company is entering the second quarter with a strong order book, and a
healthy deal pipeline across key markets and industries.
Headcount: (1) Over 90% of the headcount is offshore and only 10% is onsite. (2)
There was additional INR 33 crores of employee expenses on account of special
one-time bonus for all the employees in Q1FY22. (3) TELX signed an MOU with
Kerala government for setting up new facility with 1,500 seating capacity. (4) There
are a lot more options for employees due to work from home, so definitely attrition
is picking up and is an issue for the industry itself. (5) Wage hike will be effective
from Q2FY22, company did average wage hike of 7-8% last year.
Persistent
Alliance: (1) Alliance business is definitely seeing some amount of growth. (2) The
top customer sequential growth is related to alliance business.
1) We have factored in USD
revenue growth at 28/21/18% and
EBITDA margin at 16.5% each over
FY22/23/24E, resulting in FY21-24E
EPS CAGR at 28%.
2) At CMP, PSYS is trading at 31x
FY23E.
3) Our target price of INR 3,420
values PSYS at 30x Sep-23E,
supported by a 28% EPS CAGR
over FY21-24E.
TSU: (1) Technology services had some newer programs, where PSYS was carrying
out the knowledge transfer and, being the transition part company, is building
newer tools. (2) Company won a multi-million $, multi-year deal involving the
implementation of the Salesforce platform to drive business growth, improve
Customer experience and unify business processes for an education travel
organisation.
Healthcare: (1) The strength in healthcare is driven predominantly on the back of,
focused attempts by the company in different parts of healthcare. (2) Healthcare is
one of the biggest GDP spenders, there are instrumentation companies and
medical device companies on one side and on the other side, there are pharma
player providers.
TCV: (1) Total Contract Value for the quarter came in at USD 244.8mn and Annual
Contract Value component of Q1 TCV is of the order of USD 188.8mn. (2) In terms
of new bookings in the quarter, the new business TCV was USD 147.7mn of which
the ACV component is USD 93.5mn. (3) Deals include all bookings small and large,
renewals as well as new bookings, across existing and new customers.
Headcount: (1) PSYS reverted to its normal wage hike cycle in July (Q2FY22)
which will have 250-275 gross negative impact on the margins, offset by operating
levers (net negative impact of 75-100bps). (2) The hiring momentum continued
during this quarter, with net increase of 1224 in the headcount. (3) Overall the
headcount will continue to increase because a number of the businesses obviously
are dependent on ability to staff them and scale them over a period of time. (4)
Hiring would be mix of both lateral as well as fresher. (5) Company added 400
freshers in Q1 and plans to add 2,000 freshers in FY22.
Page 13
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IT: Sector Update
Company Management Commentary post Q1FY22 HSIE View
Zensar
Hi-Tech: (1) Hi-Tech/Manufacturing vertical registered 9.2% QoQ growth,
indicating a steady recovery by the Hi-Tech clients and company is confident that
this momentum will continue. (2) Hi-Tech is a space where there is going to be a
lot of demand.
1) We expect USD revenue growth
of +12.5/13.1% and EBIT margin of
13.6/14.0% for FY22/23E, resulting
in a revenue/EPS CAGR of
+12.4/+19.6% over FY21-24E.
2) Our TP of INR 525 (BUY) is
based on 22x FY23E EPS. The stock
is trading at a P/E of 25/21.2x
FY22/23E EPS, a discount of ~30%
to tier-2 IT.
BFSI: (1) The growth in banking indicates that the investments earlier are now
paying off. (2) Decline in insurance vertical was due to a few client specific issues
and project ramped up. (3) Company remained focused on property and casualty
insurance segment within the United States. (4) Company is expanding in
insurance market, going after the larger clients who are in the property and
casualty segment.
TCV: (1) Order booking for the quarter was at USD 96.7 million TCV, which
includes both renewals and new business. (2) The TCV tenures have not changed
drastically and it ranges from three months to 5 year. (3) Zensar will continue to
focus on large deal TCV.
Headcount: (1) Zensar's headcount crossed 9.5k mark and stood at 9,512 for
Q1FY22. (2) Company announced salary hikes for its associates effective July 1,
2021, which is second hike in the calendar year. (3) Zensar will continue to invest
in internal talent as well as on onboarding fresh talent. (4) The entire fresher
program, training has been focused, company expects its freshers to be ready in
these new area.
Source: Company, HSIE Research
Page 14
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IT: Sector Update
Change in estimates post Q1FY22 Result Update
Company
Revenue USD mn
(NEW) Change (%) EBIT % (NEW) Change (bps) EPS (Rs) NEW Change (%)
FY22E FY23E FY24E FY22E FY23E FY24E FY22E FY23E FY24E FY22E FY23E FY24E FY22E FY23E FY24E FY22E FY23E FY24E
TCS 25,678 28,375 31,018 0.0% 0.0% 0.0% 25.8 26.6 26.9 0 0 0 103.4 118.6 132.8 0.0% 0.0% 0.0%
Infosys 16,030 18,131 19,971 0.0% 0.0% 0.0% 23.0 23.1 23.5 0 0 0 50.8 59.9 67.2 0.0% 0.0% 0.0%
Wipro 10,234 11,370 12,509 0.0% 0.0% 0.0% 17.3 18.1 19.0 0 0 0 22.7 25.5 29.7 0.0% 0.0% 0.0%
HCL Tech 11,354 12,582 13,933 0.0% 0.0% 0.0% 20.0 20.5 20.5 0 0 0 49.5 57.8 65.4 0.0% 0.0% 0.0%
Tech Mahindra 5,808 6,489 7,213 0.0% 0.0% 0.0% 15.0 15.9 16.0 0 0 0 61.7 71.8 80.8 0.0% 0.0% 0.0%
Tier - 1 IT 69,104 76,947 84,644 0.0% 0.0% 0.0% 22.0 22.6 23.0 0 0 0 50.8 59.9 67.2 0.0% 0.0% 0.0%
LTI 2,016 2,392 2,790 0.1% 0.7% 1.4% 17.5 17.7 17.8 -10 -30 -30 125.4 152.6 181.8 0.9% 0.4% 0.7%
Mindtree 1,326 1,534 1,759 0.0% 0.5% 0.9% 16.1 16.7 16.8 17 32 32 76.5 92.8 109.4 1.0% 2.4% 2.8%
Mphasis 1,551 1,821 2,104 0.0% 0.0% 0.0% 15.8 16.8 18.0 0 0 0 76.7 97.6 122.7 0.0% 0.0% 0.0%
LTTS 859 987 1,136 0.0% 0.0% 0.0% 16.6 16.9 16.9 0 0 0 83.7 97.4 119.3 0.0% 0.0% 0.0%
Tata Elxsi 328 397 474 0.0% 0.0% 0.0% 26.0 26.7 25.7 0 0 0 80.5 101.2 118.7 0.0% 0.0% 0.0%
Persistent 723 873 1,031 0.0% 0.0% 0.0% 13.4 13.5 13.5 0 0 0 86.3 104.4 123.6 0.0% 0.0% 0.0%
Cyient 627 717 803 0.0% 0.0% 0.0% 12.5 13.3 13.1 0 0 0 42.6 52.3 57.9 0.0% 0.0% 0.0%
Zensar 556 628 702 0.0% 0.0% 0.0% 13.6 14.0 14.9 0 0 0 18.2 21.6 26.2 0.0% 0.0% 0.0%
Sonata 200 239 278 0.0% 0.0% 0.0% 7.9 8.2 8.4 0 0 0 33.1 41.4 49.1 0.0% 0.0% 0.0%
Mastek 291 339 385 0.0% 0.0% 0.0% 17.7 18.7 19.7 0 0 0 94.7 122.0 144.8 0.0% 0.0% 0.0%
Mid Tier - IT 8,478 9,928 11,462 0.0% 0.2% 0.5% 16.1 16.7 17.0 0 0 0 78.6 97.5 119.0 0.0% 0.0% 0.0%
Aggregate 77,582 86,874 96,106 0.0% 0.0% 0.1% 21.4 21.9 22.3 0 0 0
Source: Company, HSIE Research, * Wipro IT services USD revenue and Sonata IITS USD revenue; Note: Change % wrt Q1FY22 Result update; EPS
changer for Tier 1 IT, Mid Tier IT & Aggregate is median
Companies M-cap
(INR bn)
CMP
(INR)
TP Old
(INR)
New TP
(INR)
Old
Rating
New
Rating
Old
multiple
(x)
New
multiple
(x)
5Y Avg
(x)
10Y Avg
(x)
TCS 13,143 3,553 3,650 3,775 ADD ADD 30 30 22 21
INFY 7,403 1,742 1,730 1,780 BUY BUY 28 28 18 17
WPRO* 3,477 635 585 665 ADD ADD 23 24 16 15
HCLT 3,102 1,143 1,185 1,230 BUY BUY 20 20 14 14
TECHM* 1,365 1,414 1,330 1,530 BUY BUY 19 20 14 13
LTI* 863 4,959 4,470 5,020 ADD ADD 28 30 19 NA
MTCL* 497 3,017 2,635 3,035 ADD ADD 28 30 19 16
MPHL* 530 2,842 2,870 3,300 BUY BUY 28 30 17 14
LTTS* 399 3,825 2,680 3,035 REDUCE REDUCE 26 28 21 NA
TELX 294 4,715 4,200 4,400 REDUCE REDUCE 40 40 21 18
PSYS 245 3,212 3,260 3,420 ADD ADD 30 30 16 15
CYL* 105 953 970 1,100 ADD ADD 18 20 13 12
ZENT 104 457 500 525 BUY BUY 22 22 13 10
SSOF* 93 890 870 950 BUY BUY 20 21 13 9
MAST 63 2,499 2,800 2,930 BUY BUY 22 22 12 9
Source: HSIE Research; Note: Old rating/multiple refers to target valuations wrt Q1FY22 result update, CMP as on 17th Aug 2021, * P/E multiple
increased, TP based on Sep-23E EPS
Page 15
Page | 15
IT: Sector Update
Change in estimates since Q1FY22 Preview till date
IT Services
Company
Revenue USD mn
(NEW) Change (%) EBIT % (NEW) Change (bps) EPS (Rs) NEW Change (%)
FY22E FY23E FY24E FY22E FY23E FY24E FY22E FY23E FY24E FY22E FY23E FY24E FY22E FY23E FY24E FY22E FY23E FY24E
TCS 25,678 28,375 31,018 -0.6% -1.0% -1.1% 25.8 26.6 26.9 -64 -33 -14 103.4 118.6 132.8 -3.8% -2.8% -1.9%
Infosys 16,030 18,131 19,971 1.2% 1.8% 1.2% 23.0 23.1 23.5 -23 -32 -10 50.8 59.9 67.2 -3.0% 0.0% 0.3%
Wipro 10,234 11,370 12,509 3.4% 3.6% 3.7% 17.3 18.1 19.0 -73 -46 -17 22.7 25.5 29.7 4.2% 1.5% 3.8%
HCL Tech 11,354 12,582 13,933 -0.8% -0.8% -0.2% 20.0 20.5 20.5 -19 25 44 49.5 57.8 65.4 -0.4% 0.6% 1.5%
Tech Mahindra 5,808 6,489 7,213 3.1% 4.0% 4.0% 15.0 15.9 16.0 -8 33 2 61.7 71.8 80.8 4.2% 4.5% 6.4%
Tier - 1 IT 69,104 76,947 84,644 0.7% 0.7% 0.7% 22.0 22.6 23.0 -48 -25 -8 50.8 59.9 67.2 -0.4% 0.6% 1.5%
LTI 2,016 2,392 2,790 2.0% 3.0% 3.5% 17.5 17.7 17.8 9 -11 -3 125.4 152.6 181.8 2.8% 2.2% 3.1%
Mindtree 1,326 1,534 1,759 3.2% 3.0% 3.1% 16.1 16.7 16.8 -127 -14 2 76.5 92.8 109.4 -5.6% 1.3% 2.4%
Mphasis 1,551 1,821 2,104 4.0% 7.0% 8.0% 15.8 16.8 18.0 -26 8 21 76.7 97.6 122.7 2.3% 7.1% 8.9%
LTTS 859 987 1,136 0.3% 0.4% 1.0% 16.6 16.9 16.9 58 6 7 83.7 97.4 119.3 2.6% -0.1% 0.4%
Tata Elxsi 328 397 474 1.1% 1.9% 2.1% 26.0 26.7 25.7 -14 0 -95 80.5 101.2 118.7 0.4% 1.9% -1.4%
Persistent 723 873 1,031 4.5% 5.4% 5.7% 13.4 13.5 13.5 -2 -36 -18 86.3 104.4 123.6 3.6% 3.0% 4.3%
Cyient 627 717 803 1.0% 2.1% 2.0% 12.5 13.3 13.1 7 7 42 42.6 52.3 57.9 6.0% 4.3% 9.4%
Zensar 556 628 702 7.3% 8.4% 9.1% 13.6 14.0 14.9 17 -3 -15 18.2 21.6 26.2 8.5% 9.0% 8.8%
Sonata 200 239 278 5.7% 8.1% 8.1% 7.9 8.2 8.4 -1 19 10 33.1 41.4 49.1 4.3% 7.2% 8.0%
Mastek 291 339 385 2.2% 2.3% 2.7% 17.7 18.7 19.7 -28 8 -19 94.7 122.0 144.8 1.7% 3.8% 3.8%
Mid Tier - IT 8,478 9,928 11,462 2.9% 4.0% 4.4% 16.1 16.7 17.0 40 55 67 78.6 97.5 119.0 4.3% 4.3% 8.0%
Aggregate 77,582 86,874 96,106 0.9% 1.1% 1.1% 21.4 21.9 22.3 -34 -12 5
Source: Company, HSIE Research, * Wipro IT services USD revenue and Sonata IITS USD revenue; Note: Change % wrt Q1FY22 Preview estimates;
EPS changer for Tier 1 IT, Mid Tier IT & Aggregate is median
Companies M-cap
(INR bn)
CMP
(INR)
TP Old
(INR)
New TP
(INR)
Old
Rating
New
Rating
Old
multiple
(x)
New
multiple
(x)
5Y Avg (x) 10Y Avg
(x)
TCS 13,143 3,553 3,750 3,775 ADD ADD 30 30 22 21
INFY 7,403 1,742 1,730 1,780 BUY BUY 28 28 18 17
WPRO* 3,477 635 575 665 ADD ADD 22 24 16 15
HCLT 3,102 1,143 1,185 1,230 BUY BUY 20 20 14 14
TECHM* 1,365 1,414 1,270 1,530 BUY BUY 18 20 14 13
LTI* 863 4,959 4,520 5,020 ADD ADD 28 30 19 NA
MTCL* 497 3,017 2,670 3,035 ADD ADD 28 30 19 16
MPHL* 530 2,842 2,680 3,300 BUY BUY 28 30 17 14
LTTS* 399 3,825 2,680 3,035 REDUCE REDUCE 26 28 21 NA
TELX 294 4,715 4,165 4,400 ADD REDUCE 40 40 21 18
PSYS 245 3,212 3,160 3,420 ADD ADD 30 30 16 15
CYL* 105 953 915 1,100 ADD ADD 18 20 13 12
ZENT* 104 457 375 525 BUY BUY 18 22 13 10
SSOF* 93 890 805 950 BUY BUY 20 21 13 9
MAST* 63 2,499 2,460 2,930 BUY BUY 20 22 12 9
Source: HSIE Research; Note: Old rating/multiple refers to target valuations wrt Q1FY22 Preview estimates, CMP as on 17th Aug 2021, * P/E multiple
increased, TP based on Sep-23E EPS
Page 16
Page | 16
IT: Sector Update
Rating Metrics
Companies
Q1FY22E Preview (2
Jul'21)
Q1FY22 Result
Update
Q1FY22 Review (18
Aug'21)
TP Rating TP Rating TP Rating
TCS 3,750 ADD 3,650 ADD 3,775 ADD
INFY 1,730 BUY 1,730 BUY 1,780 BUY
WPRO 575 ADD 585 ADD 665 ADD
HCLT 1,185 BUY 1,185 BUY 1,230 BUY
TECHM 1,270 BUY 1,330 BUY 1,530 BUY
LTI 4,520 ADD 4,470 ADD 5,020 ADD
MTCL 2,670 ADD 2,635 ADD 3,035 ADD
MPHL 2,680 BUY 2,870 BUY 3,300 BUY
LTTS 2,680 REDUCE 2,680 REDUCE 3,035 REDUCE
Tata Elxsi 4,165 ADD 4,200 REDUCE 4,400 REDUCE
PSYS 3,160 ADD 3,260 ADD 3,420 ADD
CYL 915 ADD 970 ADD 1,100 ADD
ZENT 375 BUY 500 BUY 525 BUY
SSOF 805 BUY 870 BUY 950 BUY
MAST 2,460 BUY 2,800 BUY 2,930 BUY
Source: HSIE Research
Multiple change:
Companies Q1FY22E Preview (2 Jul'21) Q1FY22 Result Update Q1FY22 Review (18 Aug'21)
TCS 30 30 30
INFY 28 28 28
WPRO 22 23 24
HCLT 20 20 20
TECHM 18 19 20
LTI 28 28 30
MTCL 28 28 30
MPHL 28 28 30
LTTS 26 26 28
TELX 40 40 40
PSYS 30 30 30
CYL 18 18 20
ZENT 18 22 22
SSOF 20 20 21
MAST 20 22 22
Page 17
Page | 17
IT: Sector Update
IT Services: valuation metrics
Company MCap
(INR bn)
CMP
(INR)
TP
(INR) RECO
EPS (INR) P/E (x) RoE (%) $ Rev
CAGR%
FY21-24
EPS
CAGR%
FY21-24 FY21 FY22 FY23E FY24E FY21 FY22 FY23E FY24E FY21 FY22 FY23E FY24E
TCS 13,143 3,553 3,775 ADD 90.2 103.4 118.6 132.8 39.4 34.4 29.9 26.7 39.1 43.4 47.2 49.2 11.8 13.8
Infosys 7,403 1,742 1,780 BUY 46.2 50.8 59.9 67.2 37.7 34.3 29.1 25.9 27.3 28.8 33.6 34.6 13.5 13.3
Wipro 3,477 635 665 ADD 19.7 22.7 25.5 29.7 32.2 27.9 24.9 21.4 19.4 21.3 21.4 22.3 15.4 14.7
HCL Tech 3,102 1,143 1,230 BUY 45.9 49.5 57.8 65.4 24.9 23.1 19.8 17.5 22.4 21.1 22.0 22.2 11.0 12.5
TechM 1,365 1,414 1,530 BUY 51.1 61.7 71.8 80.8 27.7 22.9 19.7 17.5 19.3 20.9 22.3 22.8 12.2 16.5
Tier-1 IT Median 32.2 27.9 24.9 21.4 22.4 21.3 22.3 22.8 12.2 13.8
LTI 863 4,959 5,020 ADD 111.3 125.4 152.6 181.8 44.6 39.6 32.5 27.3 29.8 27.5 28.3 28.2 18.7 17.8
Mindtree 497 3,017 3,035 ADD 70.3 76.5 92.8 109.4 42.9 39.4 32.5 27.6 29.7 26.8 27.5 27.3 17.8 15.9
Mphasis 530 2,842 3,300 BUY 65.3 76.7 97.6 122.7 43.5 37.1 29.1 23.2 19.7 20.8 23.6 25.9 17.1 23.4
L&T Tech 399 3,825 3,035 REDUCE 60.1 83.7 97.4 119.3 63.7 45.7 39.3 32.1 20.1 23.1 22.9 23.9 15.6 25.7
Tata Elxsi 294 4,715 4,400 REDUCE 59.1 80.5 101.2 118.7 79.8 58.6 46.6 39.7 30.1 35.2 37.5 35.3 24.3 26.2
Persistent 245 3,212 3,420 ADD 59.0 86.3 104.4 123.6 54.5 37.2 30.8 26.0 17.4 21.8 22.5 22.8 22.1 28.0
Cyient 105 953 1,100 ADD 33.8 42.6 52.3 57.9 28.2 22.4 18.2 16.5 13.5 15.2 17.3 17.5 13.0 19.7
Zensar 104 457 525 BUY 15.3 18.2 21.6 26.2 29.8 25.0 21.2 17.5 15.7 16.3 17.5 19.1 12.4 19.6
Sonata 93 890 950 BUY 23.5 33.1 41.4 49.1 37.9 26.9 21.5 18.1 31.0 35.3 38.1 38.7 20.1 27.9
Mastek 63 2,499 2,930 BUY 73.5 94.7 122.0 144.8 34.0 26.4 20.5 17.3 25.4 28.1 29.2 27.9 18.4 25.4
Mid-Tier IT AVG 45.9 35.8 29.2 24.5 23.2 25.0 26.4 26.7 17.9 22.9
Mid-Tier IT Median 43.2 37.1 29.9 24.6 22.7 25.0 25.6 26.6 18.1 24.4
Source: HSIE Research, CMP as on 17th Aug 2021
Global IT Peers: valuation metrics
Company
MCap
(USD
bn)
CMP
USD TP RECO
EPS (USD) P/E (x) RoE (%) $ Rev
CAGR%
FY21-24
EPS
CAGR%
FY21-24 FY21 FY22 FY23E FY24E FY21 FY22 FY23E FY24E FY21 FY22 FY23E FY24E
Accenture 218.3 328 NA NR 8.8 9.8 10.8 12.8 37.1 33.3 30.4 25.5 31.3 30.5 29.3 32.3 8.5 9.3
Cognizant 40.2 76 NA NR 3.4 4.0 4.5 4.8 22.4 18.9 17.2 15.9 12.7 18.4 18.3 17.2 12.1 9.0
Capgemini^ 32.1 190 NA NR 7.3 8.1 9.3 10.5 26.1 23.5 20.4 18.2 13.2 19.7 19.8 19.2 12.0 13.7
EPAM 34.8 614 NA NR 6.3 8.4 10.5 13.0 96.8 72.9 58.3 47.3 18.3 21.0 22.5 22.1 46.5 24.2
Globant 11.5 275 NA NR 2.5 3.4 4.1 4.9 112.2 81.1 66.4 56.4 8.2 13.0 12.4 12.0 46.0 19.9
TietoEVRY^ 3.5 29 NA NR 2.2 2.3 2.5 2.7 13.6 12.6 11.7 11.1 5.7 16.1 13.9 14.6 3.3 6.9
Global IT AVG 51.4 40.4 34.1 29.1 14.9 19.8 19.4 19.5 21.4 13.8
Global IT Median 31.6 28.4 25.4 21.9 13.0 19.1 19.0 18.2 12.0 11.5
Source: HSIE Research, CMP as on 17th Aug 2021, ^ in EUR
Page 18
Page | 18
IT: Sector Update
IT sector stock performance (%)
Companies 1W (%) 1M (%) 3M (%) 6M (%) 12M (%) 3Yr (%) 5Yr (%) 10Yr (%)
TCS 6.5 11.1 15.7 15.5 57.6 76.4 170.6 610.2
Infosys 3.8 12.0 31.0 35.9 81.9 143.5 237.1 468.9
Wipro 5.2 10.0 27.2 47.7 125.4 202.6 221.1 451.9
HCL Tech 7.5 13.7 24.0 21.2 59.1 128.0 191.4 980.3
TechM 6.7 27.9 48.0 43.9 95.7 105.2 197.3 688.4
LTI 3.7 15.8 38.6 28.1 103.4 168.8 NA NA
Mindtree 8.1 10.5 45.5 80.2 159.9 193.8 433.8 3276.5
Mphasis 5.2 19.2 61.7 73.3 134.6 140.1 440.3 642.5
LTTS 4.0 13.2 49.8 44.2 148.8 138.9 NA NA
Tata Elxsi 10.7 9.2 29.3 66.7 355.2 228.1 471.9 4672.8
Persistent 1.6 12.9 33.5 87.8 225.2 268.2 375.0 1969.3
Cyient 0.1 -10.3 22.5 54.0 134.5 28.9 93.0 725.3
Zensar 14.0 21.2 61.8 91.5 164.9 66.7 115.0 1566.5
Sonata 4.7 14.4 56.0 131.0 189.2 145.3 496.5 2723.5
Mastek 4.9 0.6 33.3 103.4 262.3 354.4 1823.8 7778.1
NSE IT 5.4 13.7 30.0 32.2 83.4 121.0 209.2 499.9
Nifty 50 2.1 4.4 11.4 9.3 47.8 44.9 92.8 228.8
Source: Bloomberg, HSIE Research, CMP as on 17th Aug 2021
Note:
Green indicates out-performance to Nifty 50 during the respective period
Red indicates under-performance to Nifty 50 during the respective period
IT Sector P/E and EPS Growth
Source : Company, HSIE Research, Size of the bubble denotes market cap
Infosys
Wipro
HCLT
TechM
L&T Infotech
Mphasis
Mindtree
L&T Tech
Cyient
TCS
Persistent
Zensar
SonataMastek
Tata Elxsi
5
10
15
20
25
30
35
40
45
50
55
10 15 20 25 30 35
FY
23E
P/E
EPS CAGR FY21-24E
Page 19
Page | 19
IT: Sector Update
Increasing trend of Tech spend as % revenue among large BFSI enterprise
Source: Company, HSIE Research
BFSI Tech spend intensity increasing Growth in Tech spend (YoY %) CY16 CY17 CY18 CY19 CY20 Q1CY20 Q2CY20 Q3CY20 Q4CY20 Q1CY21 Q2CY21
JP Morgan 10.5% 12.7% 14.1% 11.6% 5.3% 9.1% 8.9% 2.8% 0.8% -2.3% -3.9%
Bank of America 0.4% -6.2% 0.6% 2.0% 12.4% 3.9% 9.3% 14.6% 21.8% 17.9% 14.5%
Wells Fargo 4.4% 3.9% 9.3% 13.1% 12.2% 20.7% 10.7% -3.7% -10.5% 5.8% 21.3%
Citi Group 1.8% 3.1% 4.1% -1.6% 4.3% 0.2% 1.0% 6.1% 9.6% 7.5% 8.8%
Morgan Stanley 1.1% 0.2% 12.6% 8.8% 12.4% 5.8% 9.5% 10.6% 22.9% 30.2% 29.9%
UBS -4.8% -3.6% -10.6% -18.9% -16.5% -13.3% -12.0% -13.5% -25.0% 13.2% 12.3%
Goldman Sachs 0.4% 10.9% 14.0% 14.1% 15.4% 12.2% 19.0% 20.1% 10.7% 16.8% 7.5%
Others 5.9% 8.4% 14.9% 14.6% 4.7% 0.2% 0.6% 10.9% 7.2% 8.7% 12.1%
Agg Tech spend growth (YoY %) 3.9% 4.5% 8.5% 7.0% 6.4% 4.8% 5.4% 6.5% 5.9% 8.1% 9.0%
Agg BFSI Enterprise Rev growth (YoY
%) -0.8% 5.4% 5.0% 2.2% 0.5% -2.1% 3.0% -1.5% 0.9% 13.9% 4.2%
BFSI $ Revenue growth (YoY %) CY16 CY17 CY18 CY19 CY20 Q1CY20 Q2CY20 Q3CY20 Q4CY20 Q1CY21 Q2CY21
Accenture 6.5% 8.9% 10.6% 0.2% 1.3% 1.6% -2.7% -1.0% 7.1% 14.0% 21.5%
Cognizant 7.3% 5.0% 3.7% 0.4% -4.2% 1.0% -5.2% -1.5% -11.1% 0.5% 7.6%
Capgemini 14.3% 9.3% 6.8% -2.1% 12.1% 0.2% 2.8% 12.5% 20.9% 12.1% 6.0%
Global IT Aggregate 6.8% 7.2% 7.7% 0.3% -0.9% 1.4% -3.7% 1.9% 4.5% 9.3% 13.6%
BFSI $ Revenue growth (YoY %) CY16 CY17 CY18 CY19 CY20 Q1CY20 Q2CY20 Q3CY20 Q4CY20 Q1CY21 Q2CY21
TCS 6.6% -9.9% 0.6% 6.4% -0.4% -2.1% -5.7% 1.2% 5.1% 18.1% 25.5%
Infosys 8.7% 6.4% 5.1% 7.3% 5.3% 3.5% 0.0% 3.5% 13.9% 19.2% 26.9%
HCL Tech 2.3% 14.9% 4.1% 3.2% 7.8% 11.4% 9.5% 9.3% 1.7% 8.8% 13.9%
Wipro 1.3% 9.2% 14.3% 6.5% -4.4% -3.6% -8.4% -3.1% -2.4% 4.1% 36.7%
Tech M 28.5% 31.5% 1.7% 1.5% 19.6% 19.3% 18.6% 23.9% 16.9% 10.4% 19.7%
Tier-1 IT BFSI Revenue Aggregate 6.4% 0.7% 4.2% 6.0% 2.3% 1.6% -1.9% 3.0% 6.2% 14.5% 25.7%
Tier-1 IT Revenue Aggregate 7.5% 7.3% 8.2% 8.0% 0.4% 3.4% -4.2% -0.3% 2.7% 8.4% 20.4%
Source: Company, HSIE Research
0%
2%
4%
6%
8%
10%
12%
14%
CY
16
CY
17
CY
18
CY
19
CY
20
Q1C
Y20
Q2C
Y20
Q3C
Y20
Q4C
Y20
Q1C
Y21
Q2C
Y21
JP Morgan Bank of America Wells Fargo Citi Group
Morgan Stanley UBS Goldman Sachs
10.8%
8.2%
6.8%
5.2%
4.0%2.9%2.4%
Page 20
Page | 20
IT: Sector Update
Commentary by large global enterprises Company Management Commentary post Q2CY21
Citigroup
Company is making significant strategic investments in product capabilities, technology and talent and have already
seen this in increased client acquisition. Automation will drive efficiency and client experience, and investments in
data will enhance revenues.
In Asia, the opportunity for us is pulling all of the pieces together into a single integrated offering across the full
spectrum of clients, and so we've been investing in that platform, the technology.
The partnership with big tech is an important part of our disruptor strategy in the U.S. as we're looking at both how
do we enhance value propositions to customers, the customer base itself and then these new ecosystems that are
evolving. At Google and several other tech partnerships that we have in the States and elsewhere in the world, we're
very deliberately going about creating a broad suite of APIs and partner integration capabilities so that we're able to
integrate other partners into our offerings, develop more innovative solutions without necessarily having to build it
or buy it all ourselves.
Wells Fargo
We've continued to hire senior leaders in risk and control areas, we've been increasing our hiring in areas that will
grow our business with over 70% of our senior-level hires focused on this objective. This includes significant hires in
data platform and analytics, strategy, digital, and our technology groups. We're focused on the cloud, payments,
fintech competition, tech companies, and our own data and digital capabilities.
We're rebuilding core capabilities but are beginning to instill a mobile-first mindset as part of our broader technology
and data-guided efforts.
Bank of America
Digitization and in particular artificial intelligence is helping us streamline processes and respond to clients more
quickly and efficiently. As an example, our bankers are using technology powered by Erica to not only better manage
credit exposure, but also identify and win new business
Morgan Stanley
We have a long-term contract we've just done with Microsoft. It's all part of the reimagination of our technology
organization. We've done the biggest move in technology of any of the large banks, maybe in the world, by spending
USD13bn on a technology company called E*TRADE (closed in Oct’20), which is basically technology and brand.
It's just a necessary step to move a large part of our business into the cloud. And we've got, I think 3 different providers.
So what I said was, that I wanted people to start coming back in the office and certainly by Labor Day…I think I said
that I felt 80% of all employee hours worked, would be done in one of our offices.
First Republic Bank
Our digital and tech investments are geared toward minimizing transactional time to create more time to build further
trust and deepen relationships with clients and to serve our communities. We continue to invest at a high rate in people
and in technology and in new financial centers.
PNC Financial Services
I still see us with certain applications that need to be reengineered to kind of be plug and play through API. Our goal
obviously is to be able to use technology as an advantage not just in terms of cost but also in terms of speed of market and
creativity as to what we can offer to clients. We're moving the data from more than 600 BBVA USA applications to PNC
applications, taking a lift and shift approach that allows us to simplify the customer conversion.
State Street Corporation
“Information systems and communications were up 5% due to continued investment in our technology estate. I mean
industry (asset management) is buoyant now, but some of the underlying trends in terms of aging technology, real
challenges around data management and how do you effectively use the data you have these issues are on the agenda of
most CEOs.
Citizens Financial We have further opportunities as we mature our agile delivery model and simplify how we operate, implement the next
wave of our next-gen technology program, including further rationalization of applications.
Equifax
We are accelerating new product introductions, beginning to leverage our expanding Equifax Cloud capabilities and
our highly differentiated data assets. We continue to expand our differentiated data assets, both organically and
through acquisitions and partnerships. Given our very strong performance in 2021, we are investing to accelerate our
tech transformation globally.
Our team of 320 data scientists located around the world are leveraging our advanced analytics in Equifax Cloud
native infrastructure to define and deploy cloud native products and solutions. The cloud is allowing them to ingest
more data. And you've seen a ramp up in new products coming out from Workforce Solutions as they start to leverage
the new cloud capabilities and of course that's happening across Equifax.
Hartford Financial
Across Commercial Lines, our technology investments have improved the speed and effectiveness of the underwriting
process. We continue to further leverage data and analytics to make more informed underwriting decisions and respond
to the needs of our distribution partners and our customers. We continue to invest in our technology platform to extend
our service offerings, including digital access for employers and employees to improve the overall customer experience.
Delta Airlines
We are starting to see signs of a resurgence of business and international travel, both of which are supporting the next leg
of the revenue recovery. And as I interact with other CEOs, I'm encouraged to hear about their own plans to accelerate
their return to office. That sentiment is coming through loud and clear in our most recent corporate survey, with almost
95% of our accounts indicating they'll be returning to their offices by the end of this year. We expect domestic corporate
volumes will recover between 55% and 60% of 2019 levels by the end of the September quarter, up from 40% at the end of
the June quarter.
Source: Company, Bloomberg, HSIE Research
Page 21
Page | 21
IT: Sector Update
Company Management Commentary post Q2CY21
United Airlines
Business travel, which was down over 90% versus 2019 for most of Q2 has inflected sharply in June. It's currently down
about 60% versus pre-pandemic levels. We expect two more inflection points in business demand. First, at the end of the
summer and second, the new budget cycle beginning in January. We expect business demand to improve by the end of
the third quarter to be down about 40% to 45% versus 2019. Our recent survey of business customers now indicate over
90% plan to return to travel, including international travel in the second half of '21. That is up from around 55% earlier
this year.
Southwest Airlines I think that this is a network that is so technology-dependent and so network-dependent that I think that's an area of
investment that everyone's probably investing more in.
Union Pacific We're redoubling our efforts to utilize best-in-class technology, training, and root cause analysis to keep our crews, our
customers and our communities safe.
Merck & Co
There's a lot of movement in data platforms that I think are critically important, but also in what I would call technology
platforms that are important for making molecules, as you said, such as antibodies. Clearly, there's a lot of movement in
protein engineering.
Johnson & Johnson
We also recognize that the digitization of healthcare is happening and rapidly accelerating technology like this, making it
possible to deliver new ways of care. An example of this is from our innovative team in China who developed a virtual
solution powered by artificial intelligence and machine learning to more effectively train and expand the number of
highly skilled electrophysiologists and provide broader access to high-quality care. Learning curves went from novice to
experts from a year to four months. In the first four months of launch, 150 newly trained physicians delivered care to
7,500 patients.
Abbott Laboratories
Medical Devices where sales grew 45% in the quarter compared to last year and more than 15.5% compared to the second
quarter of 2019. Strong growth in the quarter was led by Structural Heart, Electrophysiology, Heart Failure and Diabetes
Care, all of which grew double-digits compared to the second quarter of 2019.
Apple The next thing I think to consider is that we're in the very early innings of 5G. If you look at 5G penetration around the
world, there's only a couple of countries that are in the double-digits yet.
Intel
We've recently made strategic organizational changes to further strengthen our technology leadership and accelerate
our execution. We have restructured our data platform group into two business units: the data center and AI group
led by Sandra Rivera, an Intel veteran with deep knowledge of data center silicon and software; and the network and
edge group, which will be led by Nick McKeown, a renowned leader in the networking industry. We have also created
the accelerated computing systems and graphics group led by Raja Koduri, to increase the company's focus in key
growth areas of high-performance computing and graphics. We're also highly encouraged to have Shlomit Weiss
rejoin to strengthen our design engineering core. Greg Lavender, who joins as Intel CTO and GM of our software and
advanced technology group, will drive a unified vision for our software strategy across Intel.
We're seeing unprecedented demand as the digitization of everything is accelerated by the superpowers of AI,
pervasive connectivity, cloud-to-edge infrastructure and, increasingly, ubiquitous compute.
We expect the AI market to grow at more than 20% a year. This is why we are infusing AI across everything we do.
Marsh McLennan
Marsh & McLennan is helping clients manage cyber risk. Increasingly, we are bringing our businesses together to
leverage all of our expertise, data and relationships with public and private partners to help clients become more
resilient.
We've been undergoing some significant modernization projects on technology and on operations
AT&T
But one thing that we are not doing, and I've kind of read this in the trade and the press a bit, is we're not outsourcing
our core network functions. We are relying upon Microsoft to develop scale compute and storage capabilities at the
edge, while we retain control of our network stack and the kinds of services and products that we are going to offer
to the market.
Scale, network, cloud compute capabilities, we rely on Microsoft for that in their Azure for Operators capability going
forward. And our product development teams, our engineers really work on a service layer and the kinds of products
and services that we intend to provide with our fiber and 5G network to consumers and to our enterprise customers.
We're streamlining our operations and effectively growing digital fulfillment channels.
Comcast Delivering huge amount of data at consistent speeds and reducing latency is what's powering our growth. And we're
doing this in a cost-efficient way. Virtualizing our network, combined with our suite of digital tools, also allows us to
continue to improve the customer experience while identifying additional cost savings.
T-Mobile
We expect cash capex to now be between USD12 billion and USD12.3 billion, up from our prior guidance to be at the high
end of original range of USD11.7 billion to USD12.0 billion as we continue the robust pace of our 5G deployment and
network integration.
Ford
We're committed to delivering a richer experience for our Ford and Lincoln customers, one that improves over time
with things like our over-the-air software upgrades, data-driven experiences, productivity and uptime services for
our critical commercial customers, charging software, and a lot more.
With Argo AI, we're well-positioned to launch an autonomous people and goods delivery business with significant
future growth potential.
We're also investing in connectivity, the IT we need to put in place for the connectivity as well as customer experiences,
digital experiences, user experiences with the vehicle. So we're continuing to invest to build out our Ford+ plan.
P&G
New digital tools are being brought to the forefront, providing another productivity driver on the factory floor, in our
labs and in our office environment. E-commerce sales were up 35% for the year at over USD10 billion in sales,
representing 14% of company total.
Source: Company, Bloomberg, HSIE Research
Page 22
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IT: Sector Update
Verticals Performance Dashboard in Q1FY22
Healthcare vertical has been outperforming overall growth
Source: Company, HSIE Research, * Revenue composition of TCS, INFY, HCLT, WPRO, LTTS
Retail & CPG vertical rebounded with healthy double digit growth
Source: Company, HSIE Research, * Revenue composition of TCS, INFY, HCLT, WPRO
Manufacturing vertical recovering on YoY basis
Source: Company, HSIE Research, * Revenue composition of TCS, INFY, HCLT, WPRO, TECHM, LTI, ZENT
Healthcare vertical
consistently outperformed
in past four quarters with
healthy double digit YoY
growth post pandemic
Retail vertical rebounding
with healthy 23% YoY
growth in Q1FY22
Manufacturing vertical
recovered with 17.3% YoY
growth in Q1 after flattish
growth in previous quarter
9.2% 8.3% 7.9%
3.5%
-4.4%
-0.3%
3.1%
8.9%
21.0%
8.0%9.6% 10.3% 10.0%
7.6%10.7%
14.3%
18.0%
23.4%
-10%
-5%
0%
5%
10%
15%
20%
25%
Q1F
Y20
Q2F
Y20
Q3F
Y20
Q4F
Y20
Q1F
Y21
Q2F
Y21
Q3F
Y21
Q4F
Y21
Q1F
Y22
Total Revenue growth (YoY %) Healthcare Revenue growth (YoY %)
9.2% 8.3% 7.9%
3.5%
-4.3%-0.2%
3.3%
9.0%21.0%
6.3%
1.8%4.8% 3.9%
-8.9%
1.2% 1.3%
4.4%
23.5%
-15%
-10%
-5%
0%
5%
10%
15%
20%
25%
30%
Q1F
Y20
Q2F
Y20
Q3F
Y20
Q4F
Y20
Q1F
Y21
Q2F
Y21
Q3F
Y21
Q4F
Y21
Q1F
Y22
Total Revenue growth (YoY %) Retail Revenue growth (YoY %)
8.6% 8.1% 7.9%
3.5% -4.0%
-0.2%2.7%
8.3%
20.2%
10.5%
11.9%
16.4%
12.9%
-6.8% -5.2% -4.8%
0.1%
17.3%
-10%
-5%
0%
5%
10%
15%
20%
25%
Q1F
Y20
Q2F
Y20
Q3F
Y20
Q4F
Y20
Q1F
Y21
Q2F
Y21
Q3F
Y21
Q4F
Y21
Q1F
Y22
Total Revenue growth (YoY %) Manufacturing Revenue growth (YoY %)
Page 23
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IT: Sector Update
TCS (Q1FY22) % of Rev Q1FY22 QoQ% FY21 YoY % USD mn
BFSI 32.5% 3.7% 4.5% 2,000
Regional Markets & Others 17.7% -4.8% -5.8% 1,089
Retail & CPG 14.8% 4.9% -3.9% 911
Manufacturing 9.8% 4.9% -2.9% 603
Technology & Services 8.6% 5.2% 1.6% 529
Life Sciences & Healthcare 10.2% 8.1% 18.3% 628
Communication & Media 6.4% 1.2% -4.5% 394
Total 100.0% 2.8% 0.6% 6,154
Infosys (Q1FY22) % of Rev Q1FY22 QoQ% FY21 YoY % USD mn
Financial services 33.0% 4.7% 9.2% 1,248
Retail 15.0% 6.1% 0.9% 567
Communication 12.2% 6.4% 0.9% 461
Energy, Utilities, Resources & Services 12.1% 3.0% 2.2% 458
Manufacturing 9.7% 5.8% -0.8% 367
Hi Tech 8.3% 7.3% 17.3% 314
Life Sciences 6.8% 4.7% 13.6% 257
Others 2.9% -10.7% 20.7% 110
Total 100.0% 4.7% 6.1% 3,782
Wipro (Q1FY22) % of Rev Q1FY22 QoQ% FY21 YoY % USD mn
BFSI 33.4% 22.8% -2.5% 806
Consumer Business Unit 11.9% 2.7% 0.9% 287
Health Business Unit 12.2% 2.1% 0.3% 295
Technology 5.1% 14.4% -11.0% 123
ENU and Utilities 13.1% 11.3% 0.5% 316
Manufacturing 7.0% -0.6% -1.2% 169
Communications 17.3% 14.2% -1.1% 418
Total 100.0% 12.2% -1.4% 2,415
HCLT (Q1FY22) % of Rev Q1FY22 QoQ% FY21 YoY % USD mn
Manufacturing 17.2% -2.0% -8.6% 468
Technology & Services 17.3% 1.5% -0.8% 471
Financial Services 22.1% 3.2% 7.2% 601
Life Sciences and Healthcare 14.7% 5.2% 13.5% 400
Public Services 10.8% -2.7% 5.5% 294
Retail & CPG 10.0% -0.1% 7.3% 272
Telecom, Media & Ent & Others 7.9% -1.6% -2.4% 215
Total 100.0% 0.9% 2.4% 2,720
Tech Mahindra (Q1FY22) % of Rev Q1FY22 QoQ% FY21 YoY % USD mn
Telecom (A) 40.0% 3.2% -4.1% 554
Enterprise (B) 60.0% 4.6% 0.6% 830
Manufacturing (B1) 16.5% 4.5% -10.0% 229
BFSI (B2) 16.4% 3.7% 17.1% 227
Others (B3) 10.6% 4.3% -13.1% 147
Retail, Transport & Logistics (B4) 7.7% 3.2% 10.1% 106
TME (B5) 8.8% 8.1% 9.5% 122
Total (A+B) 100.0% 4.0% -1.4% 1,384
Source: Company, HSIE Research
Page 24
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IT: Sector Update
LTI (Q1FY22) % of Rev Q1FY22 QoQ% FY21 YoY % USD mn
BFS 32.1% 9.9% 18.4% 151
Insurance 14.5% 5.1% -3.8% 68
Manufacturing 15.0% -6.7% 7.1% 71
High-Tech, Media & Entertainment 12.7% 13.1% 8.6% 60
CPG, Retail & Pharma 10.7% 4.1% 7.5% 50
Energy & Utilities 9.1% 5.1% -2.8% 43
Others 5.9% 0.0% 62.2% 28
Total 100.0% 5.1% 9.5% 470
Mindtree (Q1FY22) % of Rev Q1FY22 QoQ% FY21 YoY % USD mn
Technology, Media and Services 45.5% 7.0% 16.3% 141
Manufacturing, CPG & Retail 22.1% 7.7% 0.2% 69
BFSI 18.2% 6.5% -8.7% 56
Travel & Transportation 13.3% 13.0% -38.8% 41
Healthcare 1.0% 0.5% NA 3
Total 100.0% 7.7% -1.1% 310
Mphasis (Q1FY22) % of Rev Q1FY22 QoQ% FY21 YoY % USD mn
Direct International 89.0% 10.0% 17.8% 323
DXC 9.2% -18.3% -32.0% 33
Others 1.8% -16.1% -3.8% 6
Total 100.0% 6.0% 5.6% 363
LTTS (Q1FY22) % of Rev Q1FY22 QoQ% FY21 YoY % USD mn
Transportation 31.3% 4.3% -17.4% 64
Telecom & Hi-tech 22.1% 3.9% 4.0% 45
Industrial Products 19.5% 7.5% -6.8% 40
Process Industry 15.5% 4.2% -15.3% 32
Medical Devices 11.7% -0.9% 30.7% 24
Total 100% 4.2% -6.3% 206
Tata Elxsi (Q1FY22) (EPD Revenue) % of Rev Q1FY22 QoQ% FY21 YoY % USD mn
Transportation 40.3% 2.1% -3.6% 26
Broadcast & Communication 45.9% 6.6% 21.6% 29
Healthcare & Medical devices 13.8% 18.1% 52.6% 9
Others 0.0% 0.0% -42.9% 0
Total 100.0% 6.1% 9.2% 64
Persistent (Q1FY22) % of Rev Q1FY22 QoQ% FY21 YoY % USD mn
BFSI 30.8% 11.7% 17.7% 51
Healthcare & Lifesciences 20.5% 15.9% 15.8% 34
Technology Cos & Emerging Verticals 48.7% 5.1% 9.0% 81
Total 100.0% 9.2% 12.9% 167
Cyient (Q1FY22) (Services Revenue) % of Rev Q1FY22 QoQ% FY21 YoY % USD mn
Transportation total 43.6% -3.4% NA 52
Aerospace 32.1% -6.1% NA 38
Rail transportation 11.5% 4.3% NA 14
C&U total 30.2% 6.4% NA 36
Communications 24.8% 6.2% NA 30
Utilities 5.4% 7.7% NA 6
Portfolio total 26.2% -2.1% NA 31
Total 100.0% -0.3% NA 119
Page 25
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IT: Sector Update
Zensar (Q1FY22) % of Rev Q1FY22 QoQ% FY21 YoY % USD mn
Manufacturing (A+B) 53.2% 9.3% -10.6% 68
Hi Tech (A) 41.9% 13.4% -9.2% 53
Mfg (B) 11.3% -3.8% -15.0% 14
Retail and Consumer Services (C ) 14.5% 0.5% -21.9% 18
Financial Services (D+E) 28.6% 0.3% -10.5% 36
Insurance ( D) 18.7% -2.1% -14.4% 24
Banking (E) 9.9% 5.0% -0.6% 13
Emerging (F) 3.7% 29.5% -22.1% 5
Total (A+B+C+D+E+F) 100.0% 5.8% -12.7% 127
Sonata (Q1FY22) % of Rev Q1FY22 QoQ% FY21 YoY % USD mn
OPD 32.8% 1.9% 5.6% 15
TTL 10.3% 2.6% -69.5% 5
CPG & Retail 32.1% 3.9% -3.3% 14
Others 24.8% -2.0% 27.2% 11
Total 100.0% 1.6% -11.3% 45
Mastek (Q1FY22) % of Rev Q1FY22 QoQ% FY21 YoY % USD mn
Government 34.1% 13.6% 61.8% 24
Retail 13.6% 3.5% -17.7% 10
Financial Services 9.6% 0.3% 10.4% 7
Healthcare 25.6% -2.7% 337.3% 18
Others 17.1% 14.9% 92.0% 12
Total 100.0% 6.5% 53.6% 70
Source: Company, HSIE Research
Healthcare vertical revenue growth trend
Healthcare $ Rev growth (QoQ %) Q1FY20 Q2FY20 Q3FY20 Q4FY20 Q1FY21 Q2FY21 Q3FY21 Q4FY21 Q1FY22
TCS 4.3% 3.1% 3.8% 3.3% 1.4% 9.4% 5.1% 4.0% 8.1%
INFY 4.0% 7.6% 5.8% -5.8% 2.2% 7.7% 10.8% -1.6% 4.7%
HCLT 2.2% 3.5% -0.9% 2.5% 1.5% 9.5% 0.7% 6.8% 5.2%
WPRO 1.4% 0.5% -3.3% 3.0% -2.3% -4.0% 4.8% 10.5% 2.1%
LTTS 15.8% 12.2% 7.7% 7.4% 8.8% 7.3% 2.8% 0.6% -0.9%
Healthcare Aggregate Revenue 3.2% 3.5% 1.5% 1.5% 0.9% 6.5% 4.8% 4.8% 5.5%
IT Companies Aggregate Revenue 1.6% 1.9% 1.5% -1.6% -6.1% 6.2% 5.1% 3.9% 4.3%
Healthcare $ Rev growth (YoY %) Q1FY20 Q2FY20 Q3FY20 Q4FY20 Q1FY21 Q2FY21 Q3FY21 Q4FY21 Q1FY22
TCS 17.5% 14.3% 16.2% 15.3% 12.1% 18.9% 20.5% 21.3% 29.2%
INFY 2.4% 9.9% 17.3% 11.4% 9.5% 9.6% 14.9% 20.1% 23.0%
HCLT 15.0% 15.7% 8.4% 7.4% 6.7% 12.9% 14.7% 19.6% 23.9%
WPRO -8.1% -4.6% -3.2% 1.5% -2.1% -6.5% 1.3% 8.7% 13.6%
LTTS 41.3% 51.1% 50.6% 50.3% 41.1% 35.1% 28.9% 20.7% 10.0%
Healthcare Aggregate Revenue 8.0% 9.6% 10.3% 10.0% 7.6% 10.7% 14.3% 18.0% 23.4%
IT Companies Aggregate Revenue 9.2% 8.3% 7.9% 3.5% -4.4% -0.3% 3.1% 8.9% 21.0%
Page 26
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IT: Sector Update
Retail & CPG vertical revenue growth trend
Retail $ Rev growth (QoQ %) Q1FY20 Q2FY20 Q3FY20 Q4FY20 Q1FY21 Q2FY21 Q3FY21 Q4FY21 Q1FY22
TCS 1.0% -0.8% 4.0% -1.3% -15.5% 11.8% 4.4% 5.0% 4.9%
INFY 1.7% -1.4% 1.7% -0.1% -9.9% 10.6% 4.7% 3.5% 6.1%
HCLT -1.4% 0.7% 15.8% -1.0% -9.2% 10.7% 5.4% -0.9% -0.1%
WPRO -1.8% -1.0% 3.0% 2.0% -7.3% 5.2% 5.5% -2.8% 2.7%
Retail Aggregate Revenue 0.4% -0.8% 4.7% -0.4% -11.9% 10.3% 4.8% 2.6% 4.2%
IT Companies Aggregate Revenue 1.6% 1.9% 1.6% -1.6% -6.0% 6.2% 5.1% 3.9% 4.3%
Retail $ Rev growth (YoY %) Q1FY20 Q2FY20 Q3FY20 Q4FY20 Q1FY21 Q2FY21 Q3FY21 Q4FY21 Q1FY22
TCS 5.8% 1.7% 4.3% 2.9% -13.9% -3.0% -2.6% 3.6% 28.6%
INFY 5.5% -0.6% 1.3% 1.8% -9.8% 1.1% 4.2% 7.9% 27.1%
HCLT 20.1% 7.8% 16.7% 13.9% 4.9% 15.3% 4.9% 5.0% 15.4%
WPRO -0.5% 2.0% 2.4% 2.2% -3.6% 2.5% 4.9% 0.0% 10.8%
Retail Aggregate Revenue 6.3% 1.8% 4.8% 3.9% -8.9% 1.2% 1.3% 4.4% 23.5%
IT Companies Aggregate Revenue 9.2% 8.3% 7.9% 3.5% -4.3% -0.2% 3.3% 9.0% 21.0%
Manufacturing vertical revenue growth trend
Mfg $ Rev growth (QoQ %) Q1FY20 Q2FY20 Q3FY20 Q4FY20 Q1FY21 Q2FY21 Q3FY21 Q4FY21 Q1FY22
TCS 3.7% 0.6% 3.3% -1.6% -10.8% 3.9% 7.4% 5.0% 4.9%
INFY -1.8% 7.9% 3.0% -3.3% -8.2% 1.7% 8.5% 6.1% 5.8%
HCLT 18.0% -1.2% 14.4% -1.2% -18.8% 4.1% 6.5% 1.0% -2.0%
WPRO -3.0% 3.0% 3.5% -1.0% -8.5% 5.0% 5.2% -1.1% -0.6%
TECHM -5.5% -4.2% 1.0% -2.1% -11.1% 1.3% 3.8% 2.1% 4.5%
LTI -7.7% 10.1% 15.7% 6.9% -16.4% 6.3% 10.0% 4.9% -6.7%
Zensar -7.3% -3.7% -0.9% -11.8% -3.2% -2.7% 0.6% -0.8% -3.8%
Mfg Aggregate Revenue 5.8% 1.8% 6.7% -1.8% -12.7% 3.6% 7.1% 3.3% 2.4%
IT Companies Aggregate Revenue 1.3% 2.0% 2.0% -1.7% -6.1% 6.0% 4.9% 3.7% 4.3%
Mfg $ Rev growth (YoY %) Q1FY20 Q2FY20 Q3FY20 Q4FY20 Q1FY21 Q2FY21 Q3FY21 Q4FY21 Q1FY22
TCS 4.3% 5.8% 8.6% 6.1% -8.7% -5.7% -2.0% 4.6% 22.9%
INFY 10.6% 15.6% 10.7% 5.5% -1.4% -7.0% -2.1% 7.4% 23.7%
HCLT 25.1% 23.0% 36.4% 31.8% -9.3% -4.5% -11.1% -9.1% 9.7%
WPRO -3.6% -0.5% 3.6% 2.4% -3.4% -1.6% 0.1% 0.0% 8.6%
TECHM -1.7% -5.4% -9.4% -10.5% -15.8% -10.9% -8.5% -4.6% 12.2%
LTI 7.5% 17.9% 27.1% 25.6% 13.8% 9.8% 4.4% 2.5% 14.4%
Zensar 2.7% -8.8% -4.5% -22.0% -18.6% -17.7% -16.4% -6.0% -6.6%
Mfg Aggregate Revenue 10.5% 11.9% 16.4% 12.9% -6.8% -5.2% -4.8% 0.1% 17.3%
IT Companies Aggregate Revenue 8.6% 8.1% 7.9% 3.5% -4.0% -0.2% 2.7% 8.3% 20.2%
Source: Company, HSIE Research; Note: difference in IT aggregate growth due to constituents
Page 27
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IT: Sector Update
Services Performance Dashboard in Q1FY22
Infosys (Q1FY22) % of Rev Q1FY22 QoQ% FY21 YoY % USD mn
Revenue Split: Digital & Core
Digital Services 53.9% 9.6% 31.5% 2,038
Core Services 46.1% -0.5% -10.2% 1,744
Revenue Split: Services & Products
Services 93.3% 4.7% 5.0% 3,529
Products & platforms 6.7% 4.7% 23.4% 253
Total 100.0% 4.7% 6.1% 3,782
Wipro (Q1FY22) % of Rev Q1FY22 QoQ% FY21 YoY % USD mn
iDEAS 60.1% 18.7% NA 1,451
iCORE 39.9% 3.6% NA 963
Total 100.0% 12.2% NA 2,415
HCLT (Q1FY22) % of Rev Q1FY22 QoQ% FY21 YoY % USD mn
IT and Business Services 71.6% 0.5% 1.0% 1,947
Engineering and R&D services 15.3% 2.2% -4.6% 417
Products & Platforms 13.1% 1.4% 21.2% 355
Total 100.0% 0.9% 2.4% 2,720
Tech Mahindra (Q1FY22) % of Rev Q1FY22 QoQ% FY21 YoY % USD mn
IT Services 88.4% 3.2% -2.2% 1,223
BPO 11.6% 11.0% 7.3% 160
Total 100.0% 4.1% -1.4% 1,384
LTI (Q1FY22) % of Rev Q1FY22 QoQ% FY21 YoY % USD mn
ADM & Testing 34.0% 7.3% 4.8% 160
Enterprise Solutions 30.7% -0.1% 8.9% 144
Infrastructure Management Services 14.9% 3.7% 36.2% 70
Analytics, AI & Cognitive 11.7% 10.8% 7.4% 55
Enterprise Integration & Mobility 8.7% 11.5% 7.9% 41
Total 100.0% 5.1% 9.5% 470
Mindtree (Q1FY22) % of Rev Q1FY22 QoQ% FY21 YoY % USD mn
Customer Success 40.0% 11.6% NA 124
Data & Intelligence 15.0% 1.0% NA 47
Cloud 19.9% 10.5% NA 62
Enterprise IT 25.1% 4.0% NA 78
Total 100.0% 7.7% NA 311
Mphasis (Q1FY22) % of Rev Q1FY22 QoQ% FY21 YoY % USD mn
Application Services 61.9% 10.0% -2.4% 225
Business Process Services 26.8% 8.1% 62.4% 97
Infrastructure Services 11.3% -14.8% -17.9% 41
Total 100.0% 6.0% 5.6% 363
Tata Elxsi (Q1FY22) % of Rev Q1FY22 QoQ% FY21 YoY % USD mn
Embedded Product Design 83.9% 6.1% 9.2% 64
Industrial Design & Visualization 14.0% 12.8% 11.0% 11
System Integration & Support 2.1% -17.3% -9.8% 2
Total 100.0% 6.4% 8.8% 76
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IT: Sector Update
Persistent (Q1FY22) % of Rev Q1FY22 QoQ% FY21 YoY % USD mn
Services 86.9% 11.5% 18.1% 145
IP driven 13.1% -4.1% -7.8% 22
Total 100.0% 9.2% 12.9% 167
Cyient (Q1FY22) % of Rev Q1FY22 QoQ% FY21 YoY % USD mn
Services 83.1% -0.3% -15.0% 119
DLM 16.9% -20.1% 25.4% 24
Total 100.0% -4.3% -10.1% 144
Zensar (Q1FY22) % of Rev Q1FY22 QoQ% FY21 YoY % USD mn
Digital & Application Services (DAS) (A+B) 85.4% 6.4% -15.3% 109
Digital Services (A) 57.9% 9.6% -0.1% 74
Core Application (B) 27.5% 0.3% -33.3% 35
Cloud and Infrastructure Services (CIS) (C) 14.6% 2.4% 5.2% 19
IMS (Cloud + Core) (C ) 14.6% 2.4% 5.2% 19
Total (CIS+DAS) 100.0% 5.8% -12.7% 127
Sonata (Q1FY22) % of Rev Q1FY22 QoQ% FY21 YoY % USD mn
Data & Analytics 11.2% 10.9% 36.5% 5.8
IMS & Cloud 13.8% 1.6% -2.6% 6.3
Microsoft Digital Platform Services 19.3% 2.6% -0.2% 9.1
Microsoft Dynamics Services 34.0% 1.9% 0.3% 13.0
Modern Validation and Deployment Engg
management Services 9.1% -6.9% -37.2% 4.4
Open Source Digital Platform Services 7.2% 6.2% -39.5% 5.2
Other ERP Services 3.1% -18.7% -56.3% 0.4
Other Services 2.3% -52.6% -11.1% 0.3
Total 100.0% 1.6% -11.3% 44.5
Source: Company, HSIE Research
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IT: Sector Update
Geography Performance Dashboard in Q1FY22
TCS (Q1FY22) % of Rev Q1FY22 QoQ% FY21 YoY% USD mn
Americas 51.0% 4.4% -1.1% 3,139
North America 49.4% 4.4% -0.8% 3,040
Latin America 1.6% 2.8% -9.0% 98
Europe 33.0% 3.4% 5.0% 2,031
UK 16.3% 4.7% -0.5% 1,003
Continental Europe 16.7% 2.1% 10.9% 1,028
India 9.3% 1.7% 3.8% 572
Asia-Pacific 4.6% -15.6% -9.4% 283
Middle East and Africa 2.1% 7.9% -6.5% 129
Total 100.0% 2.8% 0.6% 6,154
Infosys (Q1FY22) % of Rev Q1FY22 QoQ% FY21 YoY% USD mn
North America 61.7% 4.8% 5.9% 2,333
Europe 24.2% 3.8% 6.3% 915
India 2.9% 1.2% 17.2% 110
Rest of the World 11.2% 6.6% 4.3% 424
Total 100.0% 4.7% 6.1% 3,782
Wipro (Q1FY22) % of Rev Q1FY22 QoQ% FY21 YoY% USD mn
Americas 58.1% 11.4% -2.7% 1,403
Europe 30.2% 19.3% 4.2% 729
APAC & Other Emerging Markets 11.7% 0.2% -4.9% 282
Total 100.0% 12.2% -1.4% 2,415
HCLT (Q1FY22) % of Rev Q1FY22 QoQ% FY21 YoY% USD mn
Americas 63.1% 2.7% -1.7% 1,716
Europe 27.9% -3.3% 7.7% 759
Rest of the World 9.0% 2.0% 19.9% 245
Total 100.0% 0.9% 2.4% 2,720
Tech Mahindra (Q1FY22) % of Rev Q1FY22 QoQ% FY21 YoY% USD mn
Americas 46.7% 6.8% -2.6% 646
Europe 27.2% 6.8% -4.9% 376
Rest of the World 26.1% -3.0% 4.8% 361
Total 100.0% 4.1% -1.4% 1,384
LTI (Q1FY22) % of Rev Q1FY22 QoQ% FY21 YoY% USD mn
North America 67.1% 6.4% 8.5% 315
Europe 16.7% 6.1% 10.1% 78
RoW 9.6% 20.1% 6.5% 45
India 6.7% -20.9% 21.3% 32
Total 100.0% 5.1% 9.5% 470
Mindtree (Q1FY22) % of Rev Q1FY22 QoQ% FY21 YoY% USD mn
North America 76.6% 7.7% NA 238
Continental Europe 8.6% 30.5% NA 27
UK & Ireland 7.6% -4.8% NA 24
APAC & Middle East 7.2% 0.7% NA 22
Total 100.0% 7.7% NA 311
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IT: Sector Update
Mphasis (Q1FY22) % of Rev Q1FY22 QoQ% FY21 YoY% USD mn
Americas 76.3% 7.5% 4.3% 277
EMEA 12.1% -4.0% 13.6% 44
India 6.9% 14.2% 16.2% 25
RoW 4.7% 0.1% -4.7% 17
Total 100.0% 6.0% 5.6% 363
LTTS (Q1FY22) % of Rev Q1FY22 QoQ% FY21 YoY% USD mn
North America 62.3% 5.6% -6.8% 128
Europe 16.8% 5.1% -0.3% 35
India 12.9% 2.6% -3.3% 27
Rest of the World 8.0% -5.3% -16.1% 16
Total 100.0% 4.2% -6.3% 206
Tata Elxsi (Q1FY22) % of Rev Q1FY22 QoQ% FY21 YoY% USD mn
Europe 33.4% 3.9% -4.2% 25
USA 43.7% 15.9% 15.5% 33
India 13.9% 2.0% 20.8% 11
RoW 9.0% -14.5% 21.4% 7
Total 100.0% 6.4% 8.8% 76
Persistent (Q1FY22) % of Rev Q1FY22 QoQ% FY21 YoY% USD mn
North Americas 78.9% 8.7% 12.6% 132
Europe 9.5% 3.7% 9.2% 16
RoW 11.6% 17.2% 18.5% 19
Total 100.0% 9.2% 12.9% 167
Cyient (Q1FY22) % of Rev Q1FY22 QoQ% FY21 YoY% USD mn
North America 51.9% -1.4% -21.5% 62
Europe, ME, Africa 27.6% -2.7% -11.1% 33
Asia Pacific 20.5% 6.5% 3.2% 24
Total 100.0% -0.3% -15.0% 119
Zensar (Q1FY22) % of Rev Q1FY22 QoQ% FY21 YoY% USD mn
North Americas 70.2% 6.7% -14.6% 89
Europe 17.6% 0.0% -8.1% 22
Africa 12.2% 9.8% -6.5% 16
Total 100.0% 5.8% -12.7% 127
Sonata (Q1FY22) % of Rev Q1FY22 QoQ% FY21 YoY% USD mn
USA 51.0% 1.6% -11.0% 23
Europe 25.0% 1.6% -30.7% 11
RoW 24.0% 1.6% 23.6% 11
Total 100.0% 1.6% -11.3% 45
Mastek (Q1FY22) % of Rev Q1FY22 QoQ% FY21 YoY% USD mn
UK 70.1% 6.9% 43.7% 49
US 15.4% 12.0% 10.2% 11
Others 14.5% -0.4% 424.5% 10
Total 100.0% 6.5% 53.6% 70
Source: Company, HSIE Research
Page 31
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IT: Sector Update
Headcount & Revenue productivity trend for Q1FY22
Companies Headcount (Nos) Headcount Growth Revenue/employee
QoQ (%) YoY (%) QoQ (%) YoY (%)
TCS 5,09,058 4.2% 14.7% -1.4% 6.0%
INFY 2,67,953 3.2% 12.0% 1.4% 8.2%
Wipro 2,09,890 6.2% 15.4% 5.7% 8.8%
HCLT 1,76,499 4.5% 17.4% -3.4% -1.7%
TechM 1,26,263 4.3% 2.3% -0.3% 12.0%
LTI 38,298 6.4% 21.7% -1.2% -1.0%
Mindtree 27,256 14.5% 24.1% -5.9% -1.4%
Mphasis 27,043 6.8% 21.7% -0.7% -2.3%
L&T Tech 16,972 3.2% 2.0% 1.0% 17.9%
Tata Elxsi 7,914 7.5% 19.6% -1.0% 19.7%
Persistent 14,904 8.9% 37.6% 0.2% -7.5%
Cyient 12,433 3.3% -3.0% -7.4% 13.3%
Zensar 9,512 0.2% 6.2% 5.6% -4.3%
Sonata 4,101 3.7% 3.4% -2.0% 17.9%
Source: Company, HSIE Research
Tier-1 IT Utilisation trend (%) Mid-Tier IT Utilisation trend (%)
Source: Company, HSIE Research Source: Company, HSIE Research
Tier-1 IT Attrition trend (%) Mid-Tier IT Attrition trend (%)
Source: Company, HSIE Research, * INFY Voluntary Attrition from
1QFY20
Source: Company, HSIE Research
76
78
80
82
84
86
88
90
1Q
FY
19
2Q
FY
19
3Q
FY
19
4Q
FY
19
1Q
FY
20
2Q
FY
20
3Q
FY
20
4Q
FY
20
1Q
FY
21
2Q
FY
21
3Q
FY
21
4Q
FY
21
1Q
FY
22
INFY Wipro TechM%
70
75
80
85
901
QF
Y1
9
2Q
FY
19
3Q
FY
19
4Q
FY
19
1Q
FY
20
2Q
FY
20
3Q
FY
20
4Q
FY
20
1Q
FY
21
2Q
FY
21
3Q
FY
21
4Q
FY
21
1Q
FY
22
LTI Mindtree L&T Tech
Persistent Zensar%
6
8
10
12
14
16
18
20
22
1Q
FY
19
2Q
FY
19
3Q
FY
19
4Q
FY
19
1Q
FY
20
2Q
FY
20
3Q
FY
20
4Q
FY
20
1Q
FY
21
2Q
FY
21
3Q
FY
21
4Q
FY
21
1Q
FY
22
TCS INFY* Wipro
HCLT TECHM%
8
13
18
23
28
1Q
FY
19
2Q
FY
19
3Q
FY
19
4Q
FY
19
1Q
FY
20
2Q
FY
20
3Q
FY
20
4Q
FY
20
1Q
FY
21
2Q
FY
21
3Q
FY
21
4Q
FY
21
1Q
FY
22
LTI Mindtree
L&T Tech Cyient
Persistent Zensar
%
Page 32
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IT: Sector Update
Global deal booking trend Deal win TCS & Infosys vs. Global Peers
Source: ISG, HSIE Research Source: Company, HSIE Research; Accenture - outsourcing TCV &
TCS – Total TCV, INFY – Large Deal TCV
Quarterly deal trend by total contract value (USD mn)
Companies TCV Q2FY20 Q3FY20 Q4FY20 Q1FY21 Q2FY21 Q3FY21 Q4FY21 Q1FY22
TCS Total 6,400 6,000 8,900 6,900 8,600 6,800 9,200 8,100
INFY
Large deal 2,847 1,813 1,646 1,744 3,145 7,129 2,111 2,570
-Renewals 2,562 1,233 724 1,413 440 1,925 1,013 1,799
-Net New 285 5,80 922 331 2,705 5,204 1,098 771
HCLT Net New NA NA NA NA NA NA 3,100 1,664
Wipro Net New NA NA NA NA NA 1,200 1,400 715
TECHM
Net New 1,493 1,230 513 290 421 455 1,043 815
-Enterprise 490 1,080 339 185 214 352 525 463
-Telecom 1,000 150 174 105 208 104 518 352
LTI Large deal & Net New 100 75 100 20 40 278 66 NA
Mindtree
Total 307 207 393 391 303 312 375 504
-Renewals 186 128 206 315 NA NA NA NA
-Net New 121 79 187 76 NA NA NA NA
Mphasis Net New 174 189 201 259 360 247 245 505
Persistent
Total NA NA NA NA NA 302 247 245
-Renewals NA NA NA NA NA 127 109 97
-Net New NA NA NA NA NA 176 138 148
Cyient
Large deal NA NA NA NA NA NA 91 46
-Services NA NA NA NA NA NA 71 NA
-DLM NA NA NA NA NA NA 20 NA
Source: Company, HSIE Research, MPhasis Net new denotes Direct International business
10
.8 12
.3
13
.4
12
.9
13
.4
14
.1
13
.7
14
.2
14
.1 15
.3
14
.5
14
.6 16
.4
17
.2 19
.1
0%
5%
10%
15%
20%
25%
30%
35%
40%
0.0
5.0
10.0
15.0
20.0
25.0
Q4
CY
17
Q1
CY
18
Q2
CY
18
Q3
CY
18
Q4
CY
18
Q1
CY
19
Q2
CY
19
Q3
CY
19
Q4
CY
19
Q1
CY
20
Q2
CY
20
Q3
CY
20
Q4
CY
20
Q1
CY
21
Q2
CY
21
Global ACV (USD bn) YoY % - RHSUSD bn
5.7 6.4 6.0 8.9 6.9 8.6 6.8 9.2 8.1 2.7 2.8 1.8
1.6 1.7
3.1 7.1 2.1 2.6 4.66.8
4.37.1
4.87.5 6.3 8.0 7.4
9.79.0 14.4
8.98.2
9.512.1
6.7 9.24.2
3.85.1 3.8
4.9
4.66.2
5.1 5.93.7 3.14.1 3.3
3.6
3.8
4.5
3.13.3
-
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
45.0
50.0
Q1
FY
20
Q2
FY
20
Q3
FY
20
Q4
FY
20
Q1
FY
21
Q2
FY
21
Q3
FY
21
Q4
FY
21
Q1
FY
22
TCS INFY Accenture IBM Capgemini AtosUSD bn
Page 33
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IT: Sector Update
Key Large Deal wins in Q1FY22 & beyond
Client Vertical Geography Description
TCS
Alcatel-Lucent Enterprise Communication & Media US Digital transformation
Kuwait Commercial Bank BFSI Middle East TCS BaNCS
Royal London BFSI UK Devops & Machine First
SonyLIV Communication & Media India OTT Platform
Infosys
Archrock Energy, Utilities, Resources & Services US Microsoft Dynamics 365 Field Service Application
ArcelorMittal Mfg Europe Digital transformation
Posten Norge Others Europe IT Service Management
Select Portfolio Servicing Inc Financial Services US Cobalt-powered IaaS Solution
HCLT
Hitachi ABB Public Services Swiss Digital solutions
The Mosaic Company Public Services US Digital Transformation
NA Mfg US Cloud Services and modernisation
BP Public Services US Next Gen Digital services
Wipro
Bristrol Water Mfg UK Infra modernisation
Finastra Technology UK Digital Transformation
Levi Strauss & CO Consumer Business Unit US Digital Commerce Support
TECHM
NA Communication UK Customer experience
NA Retail, Transport & Logistics US IT modernisation
NA Banking, Financial Services and Insurance Africa Core Transformation
LTI
Hoist Finance AB Banking, Financial Services and Insurance Europe Digital Banking Platform
NA Energy & Utilities NA Managed security Services
NA Energy & Utilities Middle East Cloud migration
NA Banking, Financial Services and Insurance NA Cloud Infra & Engineering
Mindtree
NA BFSI NA Managed services
NA Travel & Hospitality NA AWS cloud mingration
NA Retail, CPG & Manufacturing NA App transformation
Mphasis
NA Banking, Capital Market and Insurance UK Automation, AI & ML
NA Banking, Capital Market and Insurance US Cloud & Data migration
NA Information Technology US Cloud Architecture
LTTS
NA Transportation US Engineering design
NA Industrial Products NA IoT
Tata Elxsi
NA Healthcare & Medical Devices NA Digital Platform
NA Transportation NA EV system development
Persistent
NA Tech. Cos. & Emerging Verticals NA Engineering & Modernising
NA BFSI US Co-engineering
NA Healthcare & Life Science Europe Modernising Cloud Security
Source: Company, Media Articles, HSIE Research
Page 34
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IT: Sector Update
Quarterly deal trend by volume
Number of Deals BFSI Retail Mfg Healthcare Hi-Tech Telecom &
Media
Energy &
Utilities
Q1FY21 28 15 12 9 32 14 4
Q2FY21 33 20 23 21 12 12 8
Q3FY21 40 15 26 18 18 13 11
Q4FY21 33 28 22 15 16 25 5
Q1FY22 36 14 17 16 11 13 12
Total 170 92 100 79 89 77 40
TCS (No. of
Deals) BFSI Retail & CPG
Life science &
Healthcare Mfg
Technology
& Services
Communication
& Media
Regional
Markets &
Others
Total
Q1FY21 11 6 0 1 4 3 6 31
Q2FY21 12 14 4 8 1 1 3 43
Q3FY21 18 5 6 8 2 1 3 43
Q4FY21 9 13 5 4 4 10 4 49
Q1FY22 13 5 7 8 0 5 8 46
Infosys (No. of
Deals)
Financial
Services Retail Life sciences Mfg Hi-Tech Communication
Energy,
Utilities,
Resources &
Services
Others Total
Q1FY21 2 1 0 0 5 0 0 1 9
Q2FY21 3 0 1 0 2 0 2 0 8
Q3FY21 3 0 1 2 0 0 1 1 8
Q4FY21 0 1 0 3 1 0 1 1 7
Q1FY22 1 0 0 3 0 1 2 3 10
Wipro (No. of
Deals)
Banking,
Financial
Services and
Insurance
Consumer
Business Unit
Health
Business Unit Mfg Technology Communication
Energy,
Natural
Resources and
Utilities
Total
Q1FY21 1 2 1 3 6 0 1 14
Q2FY21 3 1 2 4 0 0 0 10
Q3FY21 0 2 0 3 4 1 3 13
Q4FY21 0 2 0 1 2 2 1 8
Q1FY22 2 3 3 1 1 1 3 14
HCLT (No. of
Deals)
Financial
Services Retail & CPG
Life science &
Healthcare Mfg
Technology &
Services
Telecommunic
ation, Media,
Publishing &
Entertainment
Public
Services Total
Q1FY21 3 1 4 3 5 1 2 19
Q2FY21 2 0 9 4 0 3 4 22
Q3FY21 3 5 5 7 4 3 6 33
Q4FY21 9 5 6 9 2 4 2 37
Q1FY22 5 2 3 5 1 0 4 20
TECHM (No. of
Deals)
Banking,
Financial
Services and
Insurance
Retail, Transport
& Logistics Mfg
Technology,
Media &
Entertainment
Communication Others Total
Q1FY21 1 0 1 1 6 2 11
Q2FY21 1 0 2 1 4 1 9
Q3FY21 1 0 3 1 2 4 11
Q4FY21 0 1 3 1 3 1 9
Q1FY22 1 2 0 1 2 3 9
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IT: Sector Update
LTI (No. of Deals)
Banking,
Financial
Services and
Insurance
CPG, Retail &
Pharma Mfg
High-Tech,
Media &
Entertainment
Energy &
Utilities Others Total
Q1FY21 3 1 4 2 1 0 11
Q2FY21 2 0 5 1 2 1 11
Q3FY21 3 0 2 3 1 0 9
Q4FY21 5 2 1 2 1 0 11
Q1FY22 5 2 0 1 3 0 11
Mindtree (No. of
Deals) BFSI
Retail, CPG &
Manufacturing
Communications,
Media & Technology Travel & Hospitality Total
Q1FY21 0 3 0 2 5
Q2FY21 1 5 0 0 6
Q3FY21 1 2 0 1 4
Q4FY21 1 3 1 1 6
Q1FY22 1 2 2 1 6
Mphasis (No. of
Deals)
Banking, Capital
Market and
Insurance
Information
Technology
Communication &
Entertainment
Logistics &
Transportation Others Total
Q1FY21 3 1 0 0 1 5
Q2FY21 4 0 0 0 0 4
Q3FY21 2 0 0 1 0 3
Q4FY21 2 0 0 0 1 3
Q1FY22 3 1 0 0 0 4
LTTS (No. of Deals) Plant Engineering Medical Devices Industrial Products Telecom & Hi-tech Transportation Total
Q1FY21 2 1 2 2 3 10
Q2FY21 2 1 1 1 4 9
Q3FY21 3 2 3 1 4 13
Q4FY21 1 0 0 2 5 8
Q1FY22 2 0 1 4 4 11
Tata Elxsi (No. of
Deals)
Healthcare & Medical
Devices
Broadcast &
Communications Transportation Others Total
Q2FY21 0 1 0 0 1
Q3FY21 2 2 3 0 7
Q4FY21 1 2 2 0 5
Q4FY21 1 2 2 1 6
Persistent (No. of Deals) BFSI Healthcare & Life Science Tech. Cos. & Emerging
Verticals Total
Q1FY21 3 3 7 13
Q2FY21 3 2 6 11
Q3FY21 5 3 5 13
Q4FY21 3 3 3 9
Q1FY22 3 3 3 9
Zensar (No. of Deals) BFSI Consumer Services Mfg Hi-Tech Emerging Total
Q1FY21 1 1 0 2 1 5
Q2FY21 2 0 0 2 2 6
Q3FY21 4 1 1 2 0 8
Q4FY21 4 2 1 2 2 11
Q1FY22 2 0 0 1 5 8
Source: Company, Media articles, HSIE Research, Note: Not an exhaustive list of deals
Page 36
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IT: Sector Update
Inorganic activity in Q1FY22 till date
Company
Name Target Acquisition Area of operation Acquired Company details
Purchase
Consideration
Revenue of the
Target company
Price/Sales
(x)
Wipro Ampion Holdings
Cyber security,
DevOps &
Engineering services
Ampion is a provider of cyber security,
DevOps and quality engineering
services in Australia.
USD 117mn USD 85.5mn 1.4
TECHM DigitalOnUs, Inc. IT Services
DigitalOnUs is focused on Cloud
Native Development and Hybrid
Cloud Automation services.
USD 120mn USD 30.6mn 3.9
TECHM Eventus Solutions
Group
Business Process
Services (BPS)
Eventus Solutions Group offers end-to-
end customer engagement solutions,
such as strategy consulting, cloud
based tools and automation services,
and managed services.
USD 44mn USD 33.2mn 1.3
TECHM Brainscale
IT Services (Cloud
Consulting,
Enablement,
Application
Development and
Data Analytics)
Brainscale is a Cloud focused asset
having expertise in Cloud Consulting,
Enablement, Application Development
and Data Analytics
USD 28.8mn USD 10mn 2.9
LTI Cuelogic
Technologies
Digital product
engineering
Cuelogic operates in the digital product
engineering space. They work with
customers wanting to build digital
products, modernize legacy software
with modern technologies leveraging
cloud, AI, mobility and offer
Innovation Lab as a service to fast track
experimentation and capture untapped
value from Digital.
USD 8.4mn USD 5.5mn 1.5
Mindtree NxT Digital
business of L&T Ltd IoT & Industry 4.0
NxT Digital Business of L&T Ltd
provides solutions across industries
such as Engineering & Construction,
Manufacturing, Energy & Utilities
\and Transportation & Logistics.
USD 27.2mn USD 5.2mn 5.2
Persistent
Sureline Systems
(IP, Employees &
Assets)
Cloud Migration
Sureline Systems provides cloud
migration and disaster recovery (DR)
solutions
USD 2.5mn USD 2.69mn 1.1
Cyient Workforce Delta Digital workforce
management
Workforce Delta is a management
consultancy that specializes in digital
workforce management.
USD 2.7mn USD 2.9mn 0.9
Zensar M3bi, LLC IT &ITES
M3bi’s capabilities are in the areas of
data engineering, business intelligence
& analytics, data warehousing & big
data, as well as digital engineering
services.
USD 44mn USD 26.75mn 1.6
Sonata Encore IT Services
Solutions Pvt Ltd
User experience, data
insights, and real
time collaboration
services
Encore IT Services is a global IT service
provider enabling digital
transformation with experience in
cloud, application management,
testing, data analytics, product
engineering services & information
USD 1.2mn USD 4.68 0.3
Sonata Encore Software
Services, Inc
User experience, data
insights, and real
time collaboration
services
Encore Software Services, is
headquartered in US with major
business lines in logistics, healthcare,
testing, retail, and supply chain
industries.
USD 14.62 USD 15.46 0.9
Source: Company, HSIE Research; Acquisitions in Q1FY22 till date
Page 37
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IT: Sector Update
M&A volume and average purchase consideration for acquisition
Source: Company, HSIE Research, Q2FY22 is till date
IT Sector USD Revenue Growth (% YoY) IT Sector USD Revenue Growth (% QoQ)
Source: Company, HSIE Research
Source: Company, HSIE Research
IT Sector EBIT Margin Trend (%) IT Sector EBIT Margin Change (QoQ bps)
Source: Company, HSIE Research
Source: Company, HSIE Research
2.4
%
2.2
%
2.4
%
1.2
%
2.0
%
1.9
%
-1.5
%
-6.2
%
5.9
%
4.9
%
3.8
% 4.4
%
4.2
%
-8%
-6%
-4%
-2%
0%
2%
4%
6%
8%
Q2
FY
19
Q3
FY
19
Q4
FY
19
Q1
FY
20
Q2
FY
20
Q3
FY
20
Q4
FY
20
Q1
FY
21
Q2
FY
21
Q3
FY
21
Q4
FY
21
Q1
FY
22
Q2
FY
22
E
1 4735
297
49 6
1
8
9
5
8
3
0
2
4
6
8
10
0
50
100
150
200
250
300
350
Q1FY21 Q2FY21 Q3FY21 Q4FY21 Q1FY22 Q2FY22
Avg Purchase consideration (USD mn) Number of Acquisitions
Average purchase
consideration in Q1FY22
was USD 49mn; there
were 8 acquisitions as
compared to 5 in Q4FY21
8.2%
8.7%
8.0%
8.4% 8.0%
7.7%
3.6%
-3.9
% -0.2
%
2.7%
8.2%
20.4
%
18.4
%
-10%
-5%
0%
5%
10%
15%
20%
25%
Q2F
Y19
Q3F
Y19
Q4F
Y19
Q1F
Y20
Q2F
Y20
Q3F
Y20
Q4F
Y20
Q1F
Y21
Q2F
Y21
Q3F
Y21
Q4F
Y21
Q1F
Y22
Q2F
Y22
E
21.1
21.320.5
19.1
20.020.3
20.0
19.9
22.4
23.222.7
21.3
20.5
18
19
20
21
22
23
24
Q2
FY
19
Q3
FY
19
Q4
FY
19
Q1
FY
20
Q2
FY
20
Q3
FY
20
Q4
FY
20
Q1
FY
21
Q2
FY
21
Q3
FY
21
Q4
FY
21
Q1
FY
22
Q2
FY
22E
76
19
-85
-137
89
26
-24 -11
240
86
-51
-139
-77
-200
-150
-100
-50
0
50
100
150
200
250
300
Q2
FY
19
Q3
FY
19
Q4
FY
19
Q1
FY
20
Q2
FY
20
Q3
FY
20
Q4
FY
20
Q1
FY
21
Q2
FY
21
Q3
FY
21
Q4
FY
21
Q1
FY
22
Q2
FY
22
E
Page 38
Page | 38
IT: Sector Update
IT Sector aggregate Revenue growth and Margin trend
Source: Company, HSIE Research
Strong revenue and margin performance (Q1FY22)
Tier-1 IT Revenue Performance (CC QoQ %) Mid-Tier IT Revenue Performance (USD QoQ %)
Source: Company, HSIE Research; Tier 1 denotes Median Source: Company, HSIE Research, Mid Tier IT denotes aggregate
Tier-1 IT Revenue Performance (CC YoY %) Mid-Tier IT Revenue Performance (USD YoY %)
Source: Company, HSIE Research, Tier 1 denotes Median Source: Company, HSIE Research, Mid Tier IT denotes aggregate
8.4 8.5 6.9 1.9 16.6 11.9 10.6
20.3
20.9
20.0
22.2
21.4 21.9
22.3
18.5
19.0
19.5
20.0
20.5
21.0
21.5
22.0
22.5
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
18.0
FY18 FY19 FY20 FY21 FY22E FY23E FY24E
USD Revenue Growth % EBIT Margin % (RHS)
12.0
4.6 4.23.9
2.4
0.7
0
2
4
6
8
10
12
14
Wip
ro
Tie
r-1
IT
Info
sys
Tec
h M
TC
S
HC
LT
9.2
7.76.5 6.4 6.0 5.8
5.2 5.14.2
-4.3-6
-4
-2
0
2
4
6
8
10
Per
sist
ent
Min
dtr
ee
Ma
stek
Ta
ta E
lxsi
Mp
ha
sis
Zen
sar
Mid
Tie
r -
IT
L&
T I
nfo
tech
L&
T T
ech
Cy
ien
t
21.3
16.9 16.415.4
11.710.8
0
5
10
15
20
25
Wip
ro
Info
sys
TC
S
Tie
r-1
IT
HC
LT
Tec
h M
43.2
38.2
27.3
22.620.5 20.3 20.1 18.8
9.9
1.6
0
5
10
15
20
25
30
35
40
45
50
Ta
ta E
lxsi
Ma
stek
Per
sist
ent
Min
dtr
ee
L&
T I
nfo
tech
L&
T T
ech
Mid
Tie
r -
IT
Mp
ha
sis
Cy
ien
t
Zen
sar
Page 39
Page | 39
IT: Sector Update
Tier-1 IT Margin Performance (QoQ bps) Mid-Tier IT Margin Performance (QoQ bps)
Source: Company, HSIE Research; Tier 1 IT denotes aggregate Source: Company, HSIE Research; Mid Tier IT denotes aggregate
Tier-1 IT quarterly USD revenue growth trend (QoQ %)
Source: Company, HSIE Research
Tier-1 IT quarterly EBIT Margin (%) trend
Source: Company, HSIE Research
-328
-142 -133 -133
-81-67
(350)
(300)
(250)
(200)
(150)
(100)
(50)
-W
ipro
Tie
r-1
IT
TC
S
Tec
h M
Info
sys
HC
LT
68 47 39 14
-19-82 -93 -109
-295
-551-600
-500
-400
-300
-200
-100
0
100
L&
T T
ech
Cy
ien
t
Per
sist
ent
Ma
stek
Mp
ha
sis
Min
dtr
ee
Zen
sar
Mid
Tie
r -
IT
L&
T I
nfo
tech
Ta
ta E
lxsi
(10)
(5)
0
5
10
15
Q1F
Y18
Q2F
Y18
Q3F
Y18
Q4F
Y18
Q1F
Y19
Q2F
Y19
Q3F
Y19
Q4F
Y19
Q1F
Y20
Q2F
Y20
Q3F
Y20
Q4F
Y20
Q1F
Y21
Q2F
Y21
Q3F
Y21
Q4F
Y21
Q1F
Y22
TCS Infosys Wipro HCLT TechM(%, QoQ)
8
11
14
17
20
23
26
29
32
Q1F
Y18
Q2F
Y18
Q3F
Y18
Q4F
Y18
Q1F
Y19
Q2F
Y19
Q3F
Y19
Q4F
Y19
Q1F
Y20
Q2F
Y20
Q3F
Y20
Q4F
Y20
Q1F
Y21
Q2F
Y21
Q3F
Y21
Q4F
Y21
Q1F
Y22
TCS Infosys Wipro HCLT TechM(%)
Page 40
Page | 40
IT: Sector Update
Mid-Tier IT quarterly USD revenue growth trend (QoQ %)
Source: Company, HSIE Research
Mid-Tier IT quarterly EBIT Margin (%) trend
Source: Company, HSIE Research
-14.0
-10.0
-6.0
-2.0
2.0
6.0
10.0
14.0
Q1F
Y18
Q2F
Y18
Q3F
Y18
Q4F
Y18
Q1F
Y19
Q2F
Y19
Q3F
Y19
Q4F
Y19
Q1F
Y20
Q2F
Y20
Q3F
Y20
Q4F
Y20
Q1F
Y21
Q2F
Y21
Q3F
Y21
Q4F
Y21
Q1F
Y22
LTI Mphasis Mindtree
LTTS Persistent Cyient
Zensar Tata Elxsi
(%)
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
Q1F
Y18
Q2F
Y18
Q3F
Y18
Q4F
Y18
Q1F
Y19
Q2F
Y19
Q3F
Y19
Q4F
Y19
Q1F
Y20
Q2F
Y20
Q3F
Y20
Q4F
Y20
Q1F
Y21
Q2F
Y21
Q3F
Y21
Q4F
Y21
Q1F
Y22
LTI Mphasis Mindtree
LTTS Persistent Cyient
Zensar Tata Elxsi
(%)
Page 41
Page | 41
IT: Sector Update
Valuation charts
NIFTY IT Index Valuation Trend (P/E 1-yr fwd) IT Index Valuation Trend vs NIFTY
Source: Bloomberg, HSIE Research Source: Bloomberg, HSIE Research
TCS P/E (1-yr fwd) Trend Infosys P/E (1-yr fwd) Trend Wipro P/E (1-yr fwd) Trend
Source: Bloomberg, HSIE Research
HCL Tech P/E (1-yr fwd) Trend TECHM P/E (1-yr fwd) Trend L&T Infotech P/E (1-yr fwd) Trend
Source: Bloomberg, HSIE Research
8
13
18
23
28
Au
g-1
1
Feb
-12
Au
g-1
2
Feb
-13
Au
g-1
3
Feb
-14
Au
g-1
4
Feb
-15
Au
g-1
5
Feb
-16
Au
g-1
6
Feb
-17
Au
g-1
7
Feb
-18
Au
g-1
8
Feb
-19
Au
g-1
9
Feb
-20
Au
g-2
0
Feb
-21
Au
g-2
1
NIFTY IT Index Median
+1 SD -1 SD
-30%
-20%
-10%
0%
10%
20%
30%
40%
50%
0
5
10
15
20
25
30
Au
g-1
1F
eb-1
2A
ug
-12
Feb
-13
Au
g-1
3F
eb-1
4A
ug
-14
Feb
-15
Au
g-1
5F
eb-1
6A
ug
-16
Feb
-17
Au
g-1
7F
eb-1
8A
ug
-18
Feb
-19
Au
g-1
9F
eb-2
0A
ug
-20
Feb
-21
Au
g-2
1
(P/E) Prem/ (Disc) to NIFTY IT Index P/E
10
15
20
25
30
35
Au
g-1
6
Feb
-17
Au
g-1
7
Feb
-18
Au
g-1
8
Feb
-19
Au
g-1
9
Feb
-20
Au
g-2
0
Feb
-21
Au
g-2
1
P/E (1-yr fwd) 5 Yr Mean
1SD + 1SD -
2SD + 2SD -
10
15
20
25
30
35
Au
g-1
6
Feb
-17
Au
g-1
7
Feb
-18
Au
g-1
8
Feb
-19
Au
g-1
9
Feb
-20
Au
g-2
0
Feb
-21
Au
g-2
1
P/E (1-yr fwd) 5 Yr Mean
1SD + 1SD -
2SD + 2SD -
8
12
16
20A
ug
-16
Feb
-17
Au
g-1
7
Feb
-18
Au
g-1
8
Feb
-19
Au
g-1
9
Feb
-20
Au
g-2
0
Feb
-21
Au
g-2
1
P/E (1-yr fwd) 5 Yr Mean
1SD + 1SD -
2SD + 2SD -
8
10
12
14
16
18
20
22
Au
g-1
6
Feb
-17
Au
g-1
7
Feb
-18
Au
g-1
8
Feb
-19
Au
g-1
9
Feb
-20
Au
g-2
0
Feb
-21
Au
g-2
1
P/E (1-yr fwd) 5 Yr Mean1SD + 1SD -2SD + 2SD -
8
11
14
17
20
23
Au
g-1
6
Feb
-17
Au
g-1
7
Feb
-18
Au
g-1
8
Feb
-19
Au
g-1
9
Feb
-20
Au
g-2
0
Feb
-21
Au
g-2
1
P/E (1-yr fwd) 5 Yr Mean1SD + 1SD -2SD + 2SD -
5
10
15
20
25
30
35
40
Feb
-18
Au
g-1
8
Feb
-19
Au
g-1
9
Feb
-20
Au
g-2
0
Feb
-21
Au
g-2
1
P/E (1-yr fwd) 5 Yr Mean
1SD + 1SD -
2SD + 2SD -
Page 42
Page | 42
IT: Sector Update
Mindtree P/E (1-yr fwd) Trend Mphasis P/E (1-yr fwd) Trend L&T Tech P/E (1-yr fwd) Trend
Source: Bloomberg, HSIE Research
Tata Elxsi P/E (1-yr fwd) Trend Persistent P/E (1-yr fwd) Trend Cyient P/E (1-yr fwd) Trend
Source: Bloomberg, HSIE Research
Zensar P/E (1-yr fwd) Trend Sonata P/E (1-yr fwd) Trend Mastek P/E (1-yr fwd) Trend
Source: Bloomberg, HSIE Research
10
15
20
25
30
35
Au
g-1
6
Feb
-17
Au
g-1
7
Feb
-18
Au
g-1
8
Feb
-19
Au
g-1
9
Feb
-20
Au
g-2
0
Feb
-21
Au
g-2
1
P/E (1-yr fwd) 5 Yr Mean1SD + 1SD -2SD + 2SD -
8
10
12
14
16
18
20
22
24
Au
g-1
6
Feb
-17
Au
g-1
7
Feb
-18
Au
g-1
8
Feb
-19
Au
g-1
9
Feb
-20
Au
g-2
0
Feb
-21
Au
g-2
1
P/E (1-yr fwd) 5 Yr Mean
1SD + 1SD -
2SD + 2SD -
10
15
20
25
30
35
40
45
Feb
-18
Au
g-1
8
Feb
-19
Au
g-1
9
Feb
-20
Au
g-2
0
Feb
-21
Au
g-2
1
P/E (1-yr fwd) 5 Yr Mean1SD + 1SD -2SD + 2SD -
48
12162024283236404448525660
Au
g-1
6
Feb
-17
Au
g-1
7
Feb
-18
Au
g-1
8
Feb
-19
Au
g-1
9
Feb
-20
Au
g-2
0
Feb
-21
Au
g-2
1
P/E (1-yr fwd) 5 Yr Mean
1SD + 1SD -
2SD + 2SD -
8
12
16
20
24
28
32
36
40
Au
g-1
6
Feb
-17
Au
g-1
7
Feb
-18
Au
g-1
8
Feb
-19
Au
g-1
9
Feb
-20
Au
g-2
0
Feb
-21
Au
g-2
1
P/E (1-yr fwd) 5 Yr Mean
1SD + 1SD -
2SD + 2SD -
4
8
12
16
20
24
28
Au
g-1
6
Feb
-17
Au
g-1
7
Feb
-18
Au
g-1
8
Feb
-19
Au
g-1
9
Feb
-20
Au
g-2
0
Feb
-21
Au
g-2
1
P/E (1-yr fwd) 5 Yr Mean
1SD + 1SD -
2SD + 2SD -
4
6
8
10
12
14
16
18
20
22
24
Au
g-1
6
Feb
-17
Au
g-1
7
Feb
-18
Au
g-1
8
Feb
-19
Au
g-1
9
Feb
-20
Au
g-2
0
Feb
-21
Au
g-2
1
P/E (1-yr fwd) 5 Yr Mean1SD + 1SD -2SD + 2SD -
468
101214161820222426
Au
g-1
6
Feb
-17
Au
g-1
7
Feb
-18
Au
g-1
8
Feb
-19
Au
g-1
9
Feb
-20
Au
g-2
0
Feb
-21
Au
g-2
1
P/E (1-yr fwd) 5 Yr Mean1SD + 1SD -2SD + 2SD -
2
4
6
8
10
12
14
16
18
20
22
Au
g-1
6
Feb
-17
Au
g-1
7
Feb
-18
Au
g-1
8
Feb
-19
Au
g-1
9
Feb
-20
Au
g-2
0
Feb
-21
Au
g-2
1
P/E (1-yr fwd) 5 Yr Mean
1SD + 1SD -
2SD + 2SD -
Page 43
Page | 43
IT: Sector Update
Rating Criteria
BUY: >+15% return potential
ADD: +5% to +15% return potential
REDUCE: -10% to +5% return potential
SELL: > 10% Downside return potential
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