Indian IT Companies and the big MNCs are always on news for something or the other. Cognizant made the news for the layoff, poor results and what, not a few days back. The great Indian layoff from IT industry started from the Cognizant believed the experts. But the Q4 results of the Cognizant are showing a different case altogether. The IT giant posted 9.4% growth in 2017. The expected growth for the company next year is believed to be 8% to 10%.
In contrast, the growth story of the TCS has not been very inspiring at all. The TCS is expected to grow at 7% this year. This looks quite interesting now if the stock pricing of the Indian IT giant is looked at. TCS grew 12%-13% in stock pricing in last 7 years. Well, the stock pricing growth of TCS is of course quite stable and inspiring. However, it does not really match the revenue.
Kotak Institutional Equities gave the stock pricing data and said that TCS needs to grow at least by 5% more to match the stock growth. Since then the TCS stock has seen 5% correction. Cognizant on the other hand saw 6% growth in Nasdaq after estimating the growth rate of 8%-10% and same visibility of business this year. So, the two companies basically have a contrast of Margin. Cognizant has increased the dividend payouts as well, but TCS has struggled in this.
Now, is TCS overrated in India? Is the stock price of TCS is very high? Well, not exactly so. Yes, some will differ, but this has been the traditional business affair for the TCS. The pricing has remained the key for the Indian IT companies and that pressure is mounting. The recovery may not be crystal clear, but the path looks distinct now. The business model of Cognizant and TCS is different and thus the valuation of stocks must not be compared as such. Yes, Cognizant is turning it around, but TCS never faced the crisis Cognizant did. It may be time to put together a new strategy to rejuvenate the IT growth for the Indian companies but stock pricing may not be good criteria to determine the performance.