Infosys vs Wipro: Which IT Stock is Better?

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks

MEMBER'S LOGINX

     
Login Failure
   
     
   
     
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

Infosys vs Wipro: Which IT Stock is Better?

Mar 4, 2022

Infosys vs Wipro: Which IT Stock is Better?

Until a few years ago, the Indian IT industry was merely a contractor for global IT companies to perform menial jobs.

Today, this industry has emerged as the most preferred destination for global IT companies. This is due to the availability of highly skilled manpower.

Indian IT companies are giving tough competition to the global firms. They have risen to top positions in the global IT landscape over the last two decades.

The IT industry is now considered to be a backbone of the Indian economy.

And indeed is.

The industry contributes nearly 8% to India's GDP and is one of the largest employers in the country.

Most IT firms, big or small, are able to operate with ease and grow efficiently.

These firms have also made governance and access to government services easy and inexpensive.

In such an important industry, Infosys and Wipro are among the top 4 players in the country.

In this article, we compare these two companies to understand which is better.

Business Overview

With over four decades of experience in the IT services industry, Infosys is one of the leading IT companies in India.

It offers traditional and digital IT services to its clients across financial services, retail, communication, energy and utilities, and manufacturing.

The company also has a significant presence in emerging segments such as artificial intelligence, cloud computing, blockchain, and the metaverse.

Wipro is a global information technology, consulting, and business process services company.

Its operations are broadly classified into three segments, namely IT Services, IT products, and India State-Run Enterprise (ISRE), through which it offers a diverse range of services to its clients.

The company has a diversified client base across several industries, including banking, financial services, healthcare, energy, natural resources, and manufacturing.

The table below summarises the services, strengths, and threats of Infosys and Wipro.

Infosys vs Wipro Business Overview

  Infosys Wipro
Services Digital Marketing
Digital Commerce
Digital Experience
Metaverse
Applied AI
Data Analytics
Blockchain
Internet of Things
SAP
Oracle
Cloud
Digital Supply Chain
Cybersecurity
Testing
Application Mordernization
API Economy & Microservices
Consulting
Application Development & Mainteanance
Data, Analytics & AI
Applications
Consulting
Infrastructure Services
Digital Operations and Platforms
Blockchain
Cyber Security & Enterprise risk
DevOps
Enterprise Ops Transformation
Product Lifecycle Management
Software as a service
Key Business Verticals Financial Services and Insurance
Life Sciences and Healthcare
Retail, Consumer Packaged Goods and Logistics
Communications, Telecom OEM and Media
Energy, Utilities, Resources and Services
Manufacturing
Hi-tech
Banking, Financial Services and Insurance
Healthcare
Consumer business
Energy
Natural Resources and Utilities
Manufacturing
Technology
Communications
Competitive Advantage Leading player in Indian IT service space
Established position across verticles
Large scale operations leading to operational efficiency
Global IT player
Diversified precense across sectors
High repeat business
Threat Intense competition in the global IT industry Intense competition in the global IT industry
Data Source: Company Website

While Wipro enjoys a diversified presence across several sectors, Infosys has a larger scale of operations and is diversifying its presence across emerging themes such as metaverse and blockchain.

Revenue growth

Revenue growth is the percentage increase in revenue over a period of time. A high growth rate indicates faster growth of the business.

The revenue for Infosys grew at a compound annual growth rate (CAGR) of 7.5% in the last five years, against a 2.1% CAGR of Wipro.

R apid digitisation has helped Infosys increase its revenue, especially in the technology, energy, and utility sectors.

For Wipro, the revenue growth was led by growth in the IT services segment, especially in the finance, consumer business, and healthcare sectors.

Infosys vs Wipro Revenue Growth (2016-2021)

  2016-2017 2017-2018 2018-2019 2019-2020 2020-2021
Revenue (in m)          
Infosys 719,230 738,330 855,570 941,050 1,030,190
Wipro 580,710 570,465 616,327 638,626 644,725
Revenue Growth (%)          
Infosys   2.7% 15.9% 10% 9.5%
Wipro   -1.8% 8% 3.6% 1%
Source: Equitymaster

Profitability

After revenue growth, the next important parameter is profitability.

Investors can determine the profitability of a company using two margins, namely operating profit margin, and net profit margin.

Operating profit margin determines a company's profit from purely selling a product or service as a percentage of its revenue.

The net profit margin determines the final profit of a company after considering all operating and non-operating expenses as a percentage of its revenue.

The five-year average operating profit margin of Infosys stands at 25.8% against 20.6% of Wipro.

Infosys is leading in terms of operating profit margin mainly because its large scale of operations helps the company keep its costs lower than its competitors.

With respect to net profit margin, Infosys is again leading with a five-year average of 20% against a five-year average of 15.8% of Wipro.

Infosys vs Wipro Profit Margins (2016-2021)

  2016-2017 2017-2018 2018-2019 2019-2020 2020-2021
Operating Profit Margin (%)          
Infosys 26.6% 26.8% 24.4% 23.9% 27.4%
Wipro 20.4% 19% 19.7% 20.2% 23.6%
Net Profit Margin (%)          
Infosys 20.9% 22.7% 18.6% 18.3% 19.3%
Wipro 15.4% 14.7% 15.3% 16% 17.5%
Source: Equitymaster

Employee metrics

As the demand for IT services has gone up, it has become very easy for IT companies to capitalise on it. However, they are facing one problem that might cause a major hindrance in their journey.

Attrition.

When an employee leaves a company to join another, it is called attrition. A high attrition rate indicates that more employees are leaving the organisation.

A low attrition rate is considered good.

Hence for the IT companies to grow, they will have to keep a check on the attrition rate.

Infosys vs Wipro Attrition Rate (2016-2021)

  2016-2017 2017-2018 2018-2019 2019-2020 2020-2021
Infosys 15.0% 16.4% 18.3% 18.2% 15.2%
Wipro 16.3% 16.8% 17.6% 14.7% 12.1%
Data Source: Annual Reports

For Infosys, the attrition rate in the financial year 2021 stood at 15.2%, while for Wipro, it was 12.1%.

In the recent quarterly results, the attrition rate for both companies went up. The attrition rate for Infosys and Wipro stood at 25.5% and 22.7%, respectively.

This shows that Wipro is better at retaining its employees than Infosys.

Another employee metric that will help assess an IT company is revenue per employee. A high revenue per employee indicates greater productivity, which ultimately translates into profits.

Infosys vs Wipro Revenue per Employee (in US$ '000)

  2016-2017 2017-2018 2018-2019 2019-2020 2020-2021
Infosys 51.4 54.6 54 54.1 55.2
Wipro 46.6 49.2 46.6 43.9 41
Data Source: Annual Reports

The revenue per employee of Infosys in the financial year 2021 stood at US$ 55,200 against US$ 41,000 of Wipro.

The revenue per employee for Infosys grew at a CAGR of 1.4% in the last five years, while Wipro saw degrowth of 2.5%.

This indicates Infosys employees are more productive than Wipro's.

Shareholder payout through buybacks and dividends

Companies reward their shareholders by either paying regular dividends or buying back shares at a higher price from them. Companies with sufficient liquidity end up doing both.

Both Infosys and Wipro have been consistent in paying dividends to their shareholders and are also buying back shares from them.

Infosys and Wipro have bought back shares worth Rs 304.6 bn and Rs 335 bn from the market in the last five years.

The reason stated for the buybacks is to return excess cash to the shareholders.

However, that might not be the sole reason for a buyback.

When a company feels it is undervalued, it buys back shares from the market to increase the earnings per share (EPS) and reduce the price to earnings (P/E) ratio.

Infosys vs Wipro Dividend Ratios (2016-2021)

  2016-2017 2017-2018 2018-2019 2019-2020 2020-2021
Dividend Yield          
Infosys 2.4% 4.2% 2.1% 2.6% 2.7%
Wipro 0.4% 0.3% 0.4% 0.4% 0.3%
Dividend Payout          
Infosys 40.9% 58.7% 60.5% 44.6% 59%
Wipro 5.7% 5.7% 6.7% 5.8% 5.0%
Source: Equitymaster

To assess which company is paying higher dividends, we can use two ratios, namely dividend yield and dividend payout.

Dividend yield tells how much percentage of the share price is the dividend. In contrast, dividend payout shows what percentage of the earnings per share (EPS) is the dividend.

While a company decides the dividend payout ratio, the dividend yield is based on the market price of the share.

Higher the dividends ratios, better the returns for the shareholders.

The five-year average dividend yield for Infosys stood higher at 2.8% against 0.4% of Wipro. T he five-year average dividend payout for the company is also higher at 52.7% while that of Wipro is 5.8%.

Infosys is leading in both ratios, indicating it pays higher returns to its shareholders than Wipro.

Debtor days

Debtor days signifies the number of days it takes for the company to convert its receivables into cash.

The lower the number, the better as it indicates a regular inflow of cash.

Infosys vs Wipro Debtor Days (2016-2021)

  2016-2017 2017-2018 2018-2019 2019-2020 2020-2021
Infosys 7 7 7 7 7
Wipro 62 68 62 62 56
Source: Equitymaster

The average debtor days for Infosys in the last five years is 7, whereas, for Wipro, it is 62. This means Infosys has a shorter receivables period and can use the cash for various purposes.

Return on Equity

Return on Equity measures the rate of return the equity shareholders earn on their investment.

Higher the number, the better.

Infosys vs Wipro Return on Equity (2016-2021)

  2016-2017 2017-2018 2018-2019 2019-2020 2020-2021
Infosys 20.9% 24.8% 23.8% 25.5% 25.6%
Wipro 16.6% 16.8% 16.1% 17.7% 19.9%
Source: Equitymaster

Infosys is leading with 24.1% in terms of five-year average return on equity against 17.4% of Wipro.

Valuations

Valuation ratios such as price to earnings (P/E) and price to book value (P/BV) help determine the company's worth.

A high ratio indicates the company is overvalued, while a low ratio indicates it is undervalued.

P/E tells how much an investor is willing to pay for one rupee of earnings. P/BV indicates how much an investor is willing to pay for one rupee of book value.

Infosys vs Wipro Valuation Ratios (2020-2021)

  P/BV Ratio 5 year average P/BV P/E Ratio 5 year average P/E
Infosys 5.6 0.0 21.7 0.0
Wipro 3.2 0.0 16.2 0.0
Source: Equitymaster

The P/BV ratio of Infosys for the financial year 2021 is 5.6, while that of Wipro is 3.2.

Infosys shares are slightly overvalued than Wipro shares in terms of P/BV.

Again in terms of P/E, Infosys shares are available at a premium when compared to Wipro. The P/E ratio of Infosys stood at 21.7, while Wipro's P/E stood at 16.2 for the financial year 2021.

However, when compared to their five-year averages, both the shares look slightly overpriced.

Key acquisitions

Both Infosys and Wipro have taken the mergers and acquisitions route to strengthen their digital capabilities and expand their footprint.

Wipro has acquired CAPCO for Rs 106.14 bn (US$ 1.45 bn) to strengthen its presence banking and financial services sector. It is its largest acquisition deal in the financial year 2021.

It has also acquired Designit, Cooper, Gallagher Financial Systems, Opus Capital Markets Consultants, LLC, HPS, and ProMAX Systems to develop Wipro HOLMES in the last five years.

On the other hand, Infosys has spent Rs 14.7 bn in acquiring GuideVision, Kaleidoscope Animations, Beringer Commerce, and Beringer Capital Digital Group in the financial year 2021.

It also acquired Brilliant Basics, Wangdoody, and Hitachi Procurement Service in the last five years.

Sustainability efforts

Both Infosys and Wipro are taking sustainability measures to reduce their carbon footprint.

Infosys is using technology to lower its carbon emissions. It has become carbon neutral in 2020, which is 30 years ahead of the deadline set by the Paris Agreement.

It is also reducing its water consumption and is also minimising its waste.

On the other hand, Wipro has reduce its overall energy consumption substantially across all its office spaces and data centres.

The company plans to achieve net-zero emissions by 2040 with an absolute emission reduction of 55% by 2030.

It is also using renewable energy to power its offices and plans to increase its renewable energy consumption going forward.

Impact of Covid-19 on business

Both Infosys and Wipro felt the heat of the pandemic when it hit.

The revenue growth slowed down in the first quarter, and the profitability was affected too.

Both Infosys and Wipro saw termination or postponement of client projects. They also saw a rise in unanticipated costs relating to keeping the work environment safe and enabling work from home for their employees.

However, the pandemic provided an excellent opportunity for growth for the companies.

With digital transformation being inevitable for most companies, Infosys and Wipro saw their revenue pick up in the next few quarters.

Post the second wave, the number of deals that the companies secured has also increased, leading to higher revenue and profits.

Future prospects

As a result of the pandemic, a ll businesses, big or small, are moving to digital platforms to keep their operations going.

This puts the Indian IT industry in a sweet spot as it has emerged as a hub for IT services in the past two decades.

Infosys and Wipro ventured into digital services way before the pandemic hit the world. This helped them to be a part of the transformation journeys of their clients.

Moreover, with emerging technologies such as blockchain and metaverse picking up pace, the companies are enhancing their service offerings to capture the growing demand for them.

Infosys expects to grow its revenue at 19-20% in the current financial year led by digital, cloud, and data. This expectation is backed by the huge deal successes they had in the financial year 2021 and the quarters after that.

Moreover, Infosys has also ventured into the metaverse by launching Metaverse Foundry. This allows companies to enter the metaverse with ease.

For Wipro, the growth is expected to be driven by digital, cloud, engineering, cyber security, 5G, AI, robotics, and blockchain.

Wipro has been offering services around these next-generation technologies and also has an established client base across various industries.

In the financial year 2021, the company's order book grew 33% in the second half of the year. It added 24 new clients with a total contract value of US$ 2.6 bn.

It also closed a mega-deal that is expected to generate US$ 1 bn in revenue.

Both the companies are expected to grow at a faster pace in the medium term provided they are able to offer unique services to their clients.

Which is better?

Infosys is a clear winner in terms of revenue growth, profit margins, dividends, and returns to shareholders.

A large scale of operations, established presence across geographies, and highly skilled workforce is helping the company operate efficiently.

However, Wipro is doing a better job at retaining its workforce. The attrition rate at Wipro has been lower than Infosys over the last few years, indicating its ability to retain talent.

Moreover, Wipro's shares are under-priced when compared to Infosys. But there is hardly any gap in their valuations.

Before considering investing in any company, check for its fundamentals and valuations. This will help in deciding the suitable investment for your portfolio.

Also, consider investing for the long term to reap greater benefits from your investments. Remember, the time spent in the market is more important than timing the market.

Still wondering which is better?

Use our feature-rich comparison tool, which draws a detailed comparison between any two companies. This tool also includes a graphical analysis making it easy for you to see trends!

Infosys vs Wipro

You can also compare both the companies with their peers.

Infosys vs TCS

Wipro vs HCL

Infosys vs Tech Mahindra

Wipro vs Cyient

For a detailed analysis, check out the Infosys factsheet and Wipro factsheet.

You can also check out the latest quarterly results for Infosys and Wipro.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...

Yellow Ad

Advertisement

Last Day to Access 'One Stock Crorepati' Opportunity

As you know, recently we went LIVE with our One Stock Crorepati MEGA Summit...

Around 10,000 readers like you had registered to attend this summit.

At the summit, they learned Richa Agarwal's secret blueprint of identifying potential 'crorepati' stocks.

Plus, they also discovered the details of one stock with crorepati potential...

If you missed this summit for some reason, then you can still get all the details by watching this special replay of the summit.

Learn more

Equitymaster requests your view! Post a comment on "Infosys vs Wipro: Which IT Stock is Better?". Click here!

  

More Views on News

Drones Start to Deliver on the Huge Opportunity. Here's the Latest on Drones... (Views On News)

Jun 11, 2022

Drones have a bright future as they creep their way into more industries and companies discover more value-added use cases.

INFOSYS 2021-22 Annual Report Analysis (Annual Result Update)

May 16, 2022

Here's an analysis of the annual report of INFOSYS for 2021-22. It includes a full income statement, balance sheet and cash flow analysis of INFOSYS. Also includes updates on the valuation of INFOSYS.

Why IT Stocks Are Falling Today... (Views On News)

Apr 18, 2022

Infosys plunged over 9% intraday after the company posted its earnings. The fall was primarily because brokerage houses lowered their margins.

The Greatest Dividend Stock of All Time is... (Views On News)

Jun 16, 2022

Prudent investors should consider dividend aristocrats to create passive, predictable, and growing income to rely on whether the market moves up or down in these uncertain times.

If You had Invested Rs 1 Lakh in TCS in 2011, this is how Much You Would have Today (Views On News)

Nov 30, 2021

Did TCS perform better than the market and its peers?

More Views on News

Most Popular

The One Smallcap Stock I'll Recommend Now (Profit Hunter)

Jun 21, 2022

This aspect of investing has a very high weightage on your overall returns, but often gets ignored when winning stories are written.

5 Consistent Compounding Stocks Available at Discount. Time to Buy? (Views On News)

Jun 22, 2022

The good side of a market correction? Investors get consistent compounding stocks at a discount.

Auto Stocks are in the Fast Lane. Is it Time to Buy? (Profit Hunter)

Jun 23, 2022

The auto index is outperforming the Nifty by a mile. Have auto stocks finally bottomed out?

5 Indian Companies where Mutual Fund Holdings are Consistently Increasing (Views On News)

Jul 1, 2022

Mutual funds are buying shares at a time when FIIs are consistently selling. Here are 5 stocks where MF holdings has increased for the past 4 quarters.

Why Crude Oil Price is Falling (Views On News)

Jun 25, 2022

Global markets have become volatile, sending chills through the crude oil market.

More

Become A Smarter Investor
In Just 5 Minutes

Multibagger Stock Guide 2022
Get our special report Multibagger Stocks Guide (2022 Edition) Now!
We will never sell or rent your email id.
Please read our Terms

INFOSYS SHARE PRICE


Jul 4, 2022 (Close)

TRACK INFOSYS

  • Track your investment in INFOSYS with Equitymaster's Portfolio Tracker. Set live price alerts, get research alerts and more. Get access now...
  • Add To MyStocks

COMPARE INFOSYS WITH

MARKET STATS