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Why Did Infosys Stock Continue Its Fall Despite Posting Better Than TCS Q2 Revenue?

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It is the second trading day of losses for Infosys' stock post the announcement of its quarterly results. The IT giant's shares fell by 2.6 percent to Rs 765 a piece on Tuesday. It was the worst-performing stock on Sensex and Nifty for the day.

Why Is Infosys Stock Falling Despite Posting Better Than TCS Q2 Revenue?
Infosys: Quotes, News
BSE 704.50BSE Quote3.95 (-0.56%)
NSE 704.40NSE Quote3.75 (-0.53%)
Tata Consultancy Services: Quotes, News
BSE 2099.70BSE Quote30.25 (-1.44%)
NSE 2100.95NSE Quote29 (-1.38%)
 

On Friday, after market hours, Infosys announced its results for the September-ended quarter. Its net profit grew by 6.2 percent for the second quarter of the financial year 2019-20 to Rs 4,037 crore.

It was observed that Infosys fared better TCS (Tata Consultany Services) in terms of generating revenue. While TCS' revenue fell to single-digit growth in the July-September period, Infosys continued with double-digit growth for the fourth straight quarter.

Infosys's revenue grew by 11.4 percent in constant currency terms and TCS's revenue fell to 8.4 percent for the quarter under review from 10.6 percent in the preceding three months.

Shares of TCS were trading higher than its previous close on Tuesday, touching a high of Rs 2,047 apiece on NSE.

So why are investors optimistic about TCS but not Infosys?

Earlier this year, Infosys acquired Stater, the mortgage services unit of ABN AMRO Bank. Analysts say that if the incremental revenue from Stater were to be excluded, Infosys' revenue growth from the banking and financial services (BFS) segment underperformed in comparison to TCS.

BFS is one of the biggest revenue generators for Indian IT services companies like Infosys, TCS and Wipro.

If Stater's contribution is ignored, Infosys' year-on-year organic constant currency growth was below 6 percent when compared to nearly 8 percent for TCS.

Additionally, TCS announced a total dividend of Rs 45 (second interim dividend of Rs 5 and a special dividend of Rs 40) per share and Infosys declared a dividend of Rs 8 per share to its shareholders.

As for the year ahead, Infosys has raised the bottom-end of its revenue target for the fiscal year 2019-2020 with growth forecast at 9-10 percent when compared to 8.5-10 percent earlier.

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