After becoming independent, India saw a lot of eras
At one time, India was an agricultural economy
And the maximum shares in India's GDP used to come from the agricultural sector
But after the 1990's
When liberalisation took place in India
At the time, India's growth story got a big push from its IT sector
The IT sector changed India's entire growth story
I, Jagdeep Singh, welcome you to the Groww channel
Today, we are going to talk about two such companies
Which made India an IT superpower
And the name of those two companies are TCS and Infosys
If we join both of their workforces
Then it becomes more than 7 lakhs
If I talk about TCS's total Market Capitalisation
Then that is about 7.50 lakh cr
Then that is more than the GDP of some country's
If I see the total employment contribution of the IT sector
Then in 2000, it was around 0.5%
Which has now increased to become around 3.5%
If I talk about the total contribution of the IT sector in the country's GDP, then in 1998, it was around 1.2%
Which increased in 2017 and reached around 7.7%
So you can imagine on what a big level the IT sector grew in India
And apart from that what contributions it gave in employment and in GDP
And these are two names that you can see in every portfolio
If you take any mutual fund that invests in large cap
Then there are very less mutual funds that did not invest in these companies
Let us start the fundamental analysis of TCS and Infosys
And in this fundamental analysis we will look at very different parameters
Which we don't normally see in other companies
Because it is very difficult to analyse an IT company
And in this we have to look at different parameters
Apart from this, I will tell you at the end of video, the risks of investing in an IT company
Like it is said about the IT sector that it exports services
Because of which a lot of foreign currency flows in India
So the first important thing for you to know is, in what countries do these two companies have their business spread out
And from what countries do they get money
Friends, as you can see on my screen
From what countries do these companies get their revenue from
As you can see that both these companies get their main revenue from America
If I talk about Infosys then 60.5% revenue
Comes from North America
There, TCS's 53% revenue comes from America
Apart from that from Europe, for Infosys, 24.1%
And for TCS 29.7% revenue comes from Europe
Apart from that if we talk about India
Then in India for TCS only 5%
And Infosys only gets 2.5% revenue from India
As you saw the main revenue for these two companies comes from America and other countries
But in the recent years as other industries have grown a lot in India
And there has been a lot of requirement for IT because of which
The small share that India had in these companies has increased a little in the past few years
As you know what Infosys and TCS do
They help other industries in running their business
But automating their manual task
And by providing them softwares
And there are lot of industries where TCS and Infosys help
Like healthcare industry, manufacturing industry and retail industry
There is a big requirement for IT in all these industries
Which these companies fulfil
Let us see how much revenue these companies get and from what industries
And how much they have improved in that sector
Or whether the revenue from that sector has become lesser
As you can see on my screen that the biggest share for both the companies is in the banking sector
If I talk about TCS, then TCS' 39.6%
Overall revenue comes from the banking sector
Apart from that Infosys' 32% revenue comes from the financial sector
After financial, the second biggest sector from which the companies derive their revenue
Is retail and consumer business
If I talk about TCS then 7.2% of their total revenue
Comes from the retail and consumer business
There Infosys' is 16.4%
After this, from communication
TCS gets 16.3%
And Infosys gets 12.6%
And at the end, from the manufacturing sector, TCS get 10.7%
And Infosys' is 9.9%
Now you must be thinking that a big share of both these companies
Why does it come from the banking sector?
Because a lot of automation has happened in the banking sector
And a lot of things here have been automated that used to be manual
And I will tell you an interesting thing that in the Indian banking sector there is a very famous software, Pinnacle
Which is made by Infosys
What I told you about their market share and in which industry it's in, was about 2019
But until I tell you how much their revenue this year has increased or decreased
Until then you won't understand how this company has performed
Let us see the revenues these companies got and from what sector
And what was the percentage of growth this year
As you can see on my screen that the total revenue of TCS from the banking sector
Is 57,938 crores
And in that there has been a 19.7% increment this year
There, the revenue of Infosys from the banking sector is 26,477 crores
And this year there has been a 14.3% increment in their revenue
So if we talk about the banking sector then TCS has outperformed Infosys this year
If we talk about retail business, then the revenue TCS got from retail business in the financial year 2018
That is 25,164 crores
And this year there has been a 19.5% increment
There if I talk about Infosys then their total revenue from retail business is
13,556 crores
And even they had a 19.5% year on year increment
So both companies have increased their revenue by the same level from the retail segment
Whenever we talk about fundamental analysis there is a very important parameter, Operating Profit Margin
And I always tell you that whatever company you're investing in
First you should see how their margins have been
And whether they have improved their margins or not
So if I talk about TCS and Infosys then they have always maintained their margins
If I talk about TCS then their margin has always been above 20%
And even Infosys' margin has been above 23-24%
So now you must be thinking where are the expenses made in this business
If I talk about a normal manufacturing company
They sold something for Rs 100, and to make that if they spent Rs 80, so their margin is Rs 20 or 20%
But how do we get to know the margin in IT companies
So if we talk about IT companies, their main expense is employee expense
Because employees are their main assets
So if I talk about Infosys then more than 50% of their revenue
Goes in employee cost
If we have spoken about Operating Profit Margin let us look at both the companies
Margin and from which business it comes out of
And whether they have improved their margin this year or not
As you can see on my screen that both these companies', from different segments
What is their margin and how well they have improved their margin this year
If I talk about communication, then TCS' margin is 27.8% and last year their margin was 27.4%
Here, last year, Infosys' margin was 29.5%
And this year their margin is 24.4%
So in the communication sector, Infosys' margin has reduced a lot as compared to last year
Now let us talk about the manufacturing sector, in this sector
TCS' margin is 27.5%
Which has been the same as compared to last year
There Infosys has improved its margin a lot in that sector
Because last year their margin was 19.1%
Which has increased this year to become 22.7%
Friends, in the IT sector, margins are very important
That's why every IT company, in their financial report
Gives the margin for every segment
So that the investors can get an idea
How that company has performed in every segment
As compared to last year
So this was the fundamental analysis of TCS and Infosys
In which we compared both in every segment, in their operating profit margin, revenue and in different parameters
Now let us see the result of this quarter
How Infosys and TCS and performed there
As you can see on my screen that the revenue report of Infosys in this quarter
That is 22,629 crores
There TCS' revenue is almost 39,000 crores
If I compare year on year
What TCS' revenue was in the same quarter of last year
The increment there is of 9.8%
There the increment of TCS is only of 5.8%
So here Infosys has performed better as compared to TCS
If we compare quarter on quarter, then Infosys' revenue
Has increased by 3.8%, there TCS' revenue
Has increased by 2.1%
Now let us talk about Operating margin
This quarter Infosys has said that their operating margin is 21.7%
Which has improved by 1.2%
As compared to year on year, last quarter
There, TCS has said their Operating Profit Margin is 24%
Which has reduced by 20 base point as compared to last year on year quarter
Now let us talk about the risks of investing in these companies
Because these companies very clearly mention the risks of these business
And what they do to mitigate them
As I told you that the main business of these two companies
Happens outside the country, like in America or Europe
So their biggest risk is currency risk
If the dollar value increases, the Indian currency will depreciate because of which their revenue will increase
Because their main revenue comes from abroad, in dollars and euros
Apart from this, the second biggest risk is immigration risk
Because a lot of their business is spread out in other countries
Because of which, their resources, their engineers have to travel to other countries
So whenever there is a new law related to immigration because of which there is some problem in immigration
Then these companies get a big hit because of it
Like because of Brexit, there was a big hit on these companies
So I made this video to try to explain to you how the fundamental analysis of a company can be done
So if I talk about investment
Then you should always plan your investment really well
There is no particular time to make an investment in a good company
So if you invest for a long time in a good company
And you keep conviction in that, then you will always get good returns
So every week we make 3-4 videos on financial knowledge
So that we can help you become an intelligent investor
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