While Infosys’ YoY revenue growth eclipsed TCS after nearly eight quarters, both companies’ growth has been supported by higher software/hardware costs with ~70% of growth for TCS and 30% of growth for Infosys linked to mega deals of the past.

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Infosys – Growth at a high cost

Infosys Ltd. revenue beat in Q3 was aided by higher third-party/pass-through component and the guidance improvement was on expected lines (implying similar organic ask as HCLTech). The deal booking run-rate remains low, but adequate for growth acceleration in FY26E.

While Infosys’ YoY revenue growth eclipsed TCS after nearly eight quarters, both companies’ growth has been supported by higher software/hardware costs with ~70% of growth for TCS and 30% of growth for Infosys linked to mega deals of the past.

The quality of revenue may improve, as the dependence on mega deals reduces ahead with improvement in discretionary spending. Some of the negatives were steep decline in T5 (while T6-25 improved) which were linked to furloughs, cross-currency and perhaps productivity benefits.

The lead-lag between passing of productivity benefits and recouping additional volumes can become systemic, particularly with outsized clients/logos in the sector.

The low volume growth seen in 9MFY25 perhaps reflects this dynamic. We have moderated our estimates to factor in a higher pass-through rate, reflected in the competitive environment. Maintain Add on Infosys with a target price of Rs 2,015, based on 25x FY27E EPS.

Reliance Industries – Improved performance in all segments

Our Add rating on Reliance Industries Ltd. with a price target of Rs 1,670/share is premised on-

  1. recovery in the oil-to-chemical margins;

  2. Ebitda growth in the digital business, driven by improvement in average revenue per user, subscriber addition, and new revenue streams; and

  3. potential for further value unlocking in the digital and retail businesses.

RIL’s consolidated Q3 FY25 Ebitda stood at Rs 438 billion (+7.7% YoY, +12.1% QoQ) and adjusted profit after tax at Rs 219 billion (+11.7% YoY; +13.5% QoQ), ahead of our estimate, led by sequential improvement in O2C margins, improving ARPU, higher JioAirFiber connections and improved retail business performance.

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