“TCS stuns street,” proclaims the Financial Express, reporting the 5.4% quarter-on-quarter revenue that India’s biggest IT firm reported for the September quarter. But a look at the finer print reveals that TCS’ results, while not bad, are not really that much better than what analysts had expected.

For example, the biggest criterion by which performance is measured — revenue growth — is actually only 4.2% quarter on quarter, and not 5.4%, as the acquisition of France-based Alti contributed the remaining 1.2%. Compare this to the 4.1% growth TCS had seen in the previous quarter, and things don’t seem that different.

Another aspect is where the growth is coming from.

While smaller rival Infosys had for a long time resisted the lure of fast revenue growth in favor of not dropping its prices, TCS has seen average pricing decline or remain flat for three quarters in a row.

In the September quarter, for example, lower pricing (or realization, as the company calls it) dented revenue by 0.94 percentage points. In other words, revenue growth was about 1 percentage point behind volume (or work) growth.

The company explains that this is because of a changing revenue mix. In other words, more business (volume) is now coming from lower-price segments like emerging markets etc.. This is exactly the same sort of contracts that Infosys had decided not to chase a while back, though it has reversed that policy in the last two quarters.

As a result, while TCS was expected to grow substantially faster than Infosys, this time, the differential has narrowed. Infosys grew by 3.8% and TCS by 4.2%. The rest of the numbers too are largely along expected lines — neither worse nor better. The ‘surprise factor’ in Infosys’ results resulted in the stock popping 5% on results day.

As such, can we really expect any strong upward movement in TCS on Thursday? We believe not.

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