TCS, Infosys and Wipro face Unique Problem in Cost-Cutting! Is it a New IT Trend? Report

The COVID-19 pandemic has halted travel which in turn has forced people to stay indoors and work from home. Indian IT Majors Tata Consultancy Services (TCS), Infosys and Wipro are facing a unique problem. While their travel expenditure has reduced and fallen up to 86% in June quarter, their communication expenses have increased by 20 to 30 percent. 

According to the data published by these companies in their quarterly results, the aggregate travel expenditure has declined from Rs 2,153 crore in the June Quarter 2019 to Rs 500 crore in June quarter 2020. One of the major expenditure is coming from video- conferencing which stands at Rs 742 crore in the end of this quarter whereas it was Rs 600 crore in the corresponding quarter.

Travel was the third biggest expenditure for IT majors before the coronavirus outbreak. However, at present the communication expenditure seems to be  higher than their travel bills. 

Among the three companies, it is Infosys that has witnessed the biggest drop in travel expenditure from Rs 827 crore in June 2019 to Rs 116 crore in June 2020, a drop by 86 per cent. The communication expense rose by 28 percent in the corresponding period. This decline in travel expense has helped companies maintain growth in profit especially since they are facing the brunt of COVID induced losses.

“For TCS, while the travel expense came down by 69 per cent year-on-year, the communication expense rose 22 per cent. For Wipro, the travel expense fell 75 per cent and the communication expense went up 26 per cent,” The New Indian Express cited in its report.

“In the case of Infosys, while the revenue growth was 8.5 per cent y-o-y, the net profit jumped 12.4 per cent. In case of Wipro, the revenue grew by 1.3 per cent but the profit after tax (PAT) grew 8.8 per cent. In case of TCS, while revenue expanded marginally by 0.4 per cent, the profit declined 13.5 per cent,” the report added.

When it comes to growth in profitability in the June 2020 quarter, the share prices of Infosys and Wipro have seen a sharp rise. Infosys’s share price jumped by 16.6 per cent between Tuesday and Wednesday. Similarly, the shares of Wipro jumped by 17 per cent on Tuesday.