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Home > Business > Special

Infy, TCS, Wipro: World's top 3 IT firms by market cap

B G Shirsat | October 03, 2006

Indian IT-ITES companies are currently pipping their global counterparts to the post in market capitalisation. Infosys Technologies ranks number one, with TCS coming second, and Wipro taking the third place.

Accenture ranks fourth, followed by Electronic Data Systems. Cognizant Solutions ranks sixth, Amdocs, seventh, Computer Sciences, eight and Cap Gemini is ranked ninth. Satyam Computer occupies the 10th position.

The four Indian software majors (Infosys, TCS, Wirpo and Cognizant), with a combined annual revenue of $10.57 billion, aggregated a market capitalisation of $73.44 billion. They are among the world's top 10 software companies by market capitalisation.

Compared to this, five US-based software companies and Cap Gemini together have a market capitalisation of $65.01 billion as against their combined annual revenue of $66.98 billion.

Why do investors see more value in Indian software companies? For one, Indian firms are growing faster than their global peers in terms of net earnings.

The revenue and net earnings of all four frontline Indian software firms have more than doubled over the last three years while global software companies are registering an annual growth of around five to six per cent.

Morgan Stanley research reports on the global software valuations show a revenue growth rate of around 35 per cent for the Indian software firms while global peers are likely to grow at the rate of around six per cent over the next two years.

The estimates for net earnings for Indian companies is pegged around 25-30 per cent while global IT majors would witness an estimated earnings growth rate of around 15-20 per cent.

Infosys' net earnings are estimated to grow at two years compound annual growth rate of of 33 per cent while TCS earnings is expected to grow at 31 per cent. Wipro and Satyam Computers earnings growth rate of 26 per cent each will be ahead of Accenture (11 per cent), Amdocs (15 per cent) and Computer Sciences (17 per cent) in earnings growth in next two years. Cap Gemini, EDS and Cognizant Solutions, which have low earnings base would outperform their peer with earnings CAGR of over 50 per cent.

Infosys' guidance for fiscal 2007indicates a revenue growth rate of 25.2- 27.3 per cent over fiscal 2006 and its EPS is expected grow at 21.4-23.4 per cent. Satyam Computer expects a revenue growth rate of around 29.2-31.2 per cent while its EPS is expected to grow by 27.5- 29.5 per cent. Wipro and TCS have not provided their guidance for fiscal 2007.

Among US software firms, Accenture has predicted its fiscal 2007 revenue growth rate at 9-12 per cent and its EPS to grow by 11.3-11.5 per cent. Amdocs expects its fiscal 2007 revenue growth of 16.5-20.5 per cent and EPS growth of 27.2-33.3 per cent.

Cognizant Solutions' revenue for the year ended December 2006 is expected to grow 55.2 per cent and EPS, 38 per cent. EDS revenue for year ended December 2006 expected to be up by 4.2 per cent and EPS by 45 per cent.

But will a potential US slowdown impact the earnings and value of the Indian IT services sector? J M Morgan Stanley analysts see no such indicators. They reason that new customer-wins are strong, existing customers are ramping up, and management teams appear to have high visibility.

However, what if the US slows significantly going forward? Analysts opine that this sector can be resilient to an extent, but there will be an impact nevertheless.

The larger scale of the companies, a more diverse revenue base, and widespread acceptance of offshore outsourcing now may be mitigating factors relative to the 2001 slowdown.

Earnings growth expectations are less lofty and valuations relative to the Sensex are lower than those at the time of the 2001 slowdown. Analysts say if there were to be a significant slowdown on the other hand, the stocks may decline in absolute terms, but relative performance may not be at significant risk.

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Number of User Comments: 8

Sub: they might not be paying enough

The indian it majors might not be paying more money to their employees but they do pay enough money to live a luxurious life at ...

Posted by chaitanya

Sub: Where is IBM

Didn't see IBM in the do we suppose it is way ahead of the rest???

Posted by XYZ

Sub: Infy, TCS, Wipro: World's top 3

Maybe they are top 3 but do they compensate enough or pay enough salary to their employees as compared to their American compatriots? Do these ...

Posted by Saran

Sub: Infy, TCS, Wipro: World's top 3

Hai, Always the Indian Software companies are looking in positive way.So the companies in the list.All the best.

Posted by Sugumar Rathinam

Sub: Software services not Software

Hi, I hope people are not taken in by exuberance. This list is strictly comparing global "services" companies in IT/ITES and not "software" companies as ...

Posted by pleni



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