Infy cheaper than TCS; will gain: Bhavin Shah, CEO, Equirus Securities

In a chat with ET Now, Bhavin Shah, CEO, Equirus Securities, shares his views on the TCS earnings.

ET Now: Looking at the 5.7 per cent volume growth that we have seen, which are those sectors you think that have contributed the most and also looking at telecom, infrastructure all that picking up. Do you see any hope in Indian market also for TCS?

Bhavin Shah: TCS has a strong position in India and I actually do think that with this new government which is far more focussed on the correct use of technology, moderation of the way government departments operate, more technology in railways, TCS should see some improvement in their India business. I do think that India opportunity could get much better in coming years than what it has been in last couple of years.

ET Now: You said that you are advising only TCS as the buy in the IT sector. Of course Infosys had managed to give out better set of results than anticipated. In fact exceeding the margin estimates. Why do you think that they are not a good buy and only TCS is at a good buy especially when the stock has run up so much as well?

Bhavin Shah: So Infosys definitely is significantly cheaper than TCS. Valuation gap is very high and just from that perspective, it is very important to look at Infosys. Quite a few fund managers are positioned that way looking at the valuation gap. What I think prevents us from seeing material upside on Infosys is that the revenue growth visibility for Infosys continues to remain weak. While they had reported better than expected quarter in terms of margins, much of the margin upside came from reasons which are not truly operational, they had flattish head count because of high attrition that is not a kind of reason why you want to see margin upside.

They had a change in depreciation policy whereas if you look at the revenue growth, it was slightly weaker than expected and whatever we understand, based on various data that we see as well as our checks outside, we do not feel that Infosys is going to be able to accelerate its revenues at a material rate in at least next six to nine months. So based on that view, we think that Infosys could move up little bit from here but upside will be very much capped and more importantly we want to see some clues on Infosys actually finding a way to accelerate its revenue growth. We still in a wait and see more on that.