Shares of TCS, Infosys, Wipro, ADRs, and Future Dividends: Which Massive IT Stocks Should I Purchase After the Q4 Results?

The fourth-quarter and full-year profits for FY24 have been released by Tata Consultancy Services (TCS), Infosys, and Wipro, three of India’s largest software businesses. With Infosys declaring the largest-ever payment, two of them have announced massive dividend distributions. TCS did better than its competitors, Infosys unexpectedly maintained a consistent performance, and Wipro had inconsistent results.

The earnings, share price, dividend, and recommendations of TCS, Infosys, and Wipro are compared here:

1. Tata Consultancy Services (TCS): With a market share advantage over other IT companies in India, TCS was the first to reveal its Q4 results, exceeding projections.

Results for the fourth quarter showed that ITCS had a 9.1% YoY increase in its consolidated PAT, which was Rs 12,434 crore and attributable to the company’s owners. The rise in the bottom line was 12.44% sequentially.

Consolidated revenue from operations for the quarter was Rs 61,237 crore in Q4FY24, up 3.51% from Rs 59,162 crore in the same period the previous year. However, revenue increased from Rs 60,583 crore in Q3 FY24 by 1.08%. In Q4 FY24, sales increase was 2.2% year over year at constant current.

Dividend: For FY24, TCS has suggested a final dividend of Rs 28 per share, with a face value of Rs 1. In a previous round of interims, TCS paid a staggering 4,500% dividend, or Rs 45 per share, for FY24. TCS paid dividends of Rs 115 per share, or an astounding 11,500%, in the preceding fiscal year.

Share Price: Following the trading hours on April 23, TCS’s share price was slightly higher at Rs 3874.20 per share. The 52-week high and low of the stock are, respectively, Rs 4,254.45 and Rs 3,126.60. It is valued at Rs 14,01,719.47 crore on the market. TCS shares have gained only 2% year to date. ADRs for TCS are not listed on the NYSE.

Advice for Brokers: According to Motilal Oswal’s research report, “We continue to expect TCS to benefit in FY25 from the large BSNL deal execution.” However, the total growth rate, which we estimate to be 8.8% YoY, is likely to be affected by the ongoing uncertainty surrounding the recovery in North America and Europe. TCS is expected to be one of the largest-growing large-cap firms in our covered universe, even though its growth has been in single digits. We account for a 10.0% USD sales CAGR from FY24 to FY26E.”

Furthermore, despite having few further cost levers at its disposal, Motilal’s report said that TCS could post a full-year EBIT margin of 25.6% in FY25, up 90bp YoY, given the unanticipated upside 4Q EBIT margin. The rebound in growth in 2HFY25 is probably going to be fueled by the workforce’s ongoing optimization toward platforms and new talent.

Motilal anticipates that FY25E/FY26E EBIT margins would increase from FY24’s 24.7% to 25.6%/26.4%.

According to Motilal’s remark, “We have broadly maintained our FY25-FY26 EPS estimates,” about the value. We project a USD revenue CAGR of around 10% and an INR EPS CAGR of about 15% for FY24–26E. Our target price of INR 4,600 represents a 15% upside potential and 27 times FY26E EPS. We continue to recommend buying the stock.”

Infosys: The second-biggest IT company, Infosys too posted better-than-expected Q4 results, directly behind TCS.

Q4 Results: With a rise of 30% YoY and 30.5% QoQ, Infosys reported a consolidated net profit of Rs 7,975 crore in Q4FY24, before minority interest. To Rs 37,923 crore, consolidated revenue decreased 2.3% sequentially but up slightly year over year by 1.3%. Revenue fell 2.2% quarter over quarter and was unchanged year over year when measured in constant currency. Infosys reported $18.6 billion in sales for FY24, with an operating margin of 20.7% and a rise of 1.4% in constant currency.

Infosys projects revenue growth of 1%–3% in constant currency for the financial year 2024–2025 guidance, with an operating margin of 20%–22%.

Dividend: Infosys, like TCS, is planning to provide its shareholders with a special dividend in addition to a dividend of up to Rs 28 per share. For the fiscal year that concluded on March 31, 2024, the business proposed a final dividend of Rs 20/-per equity share in addition to a special dividend of Rs 8/-per equity share. May 31, 2024 is the record date for the Annual General Meeting and the final and special dividend payments. On July 1, 2024, the dividend will be disbursed.

The business had paid an interim dividend of 360%, or Rs 18 per share, for FY24.

Share Price: With a market valuation of Rs 5,98,430.56 crore, Infosys’s shares closed at Rs 1441.70 each on April 23, up 0.64%. The stock’s 52-week high and low are, respectively, Rs 1,731 and Rs 1,215.45 per share. As of right now, Infosys shares on the BSE have dropped 7% compared to TCS. However, Infosys’s ADRs are listed on the NYSE and are now trading at $17.17, a 6.6% YoY decrease.

Kotak Institutional Equities made the following recommendation in a research note: “We bake in the miss in 4QFY24 numbers, lower-than-expected FY2025 guidance and contribution from the acquisition of in-tech leading to 1-2% cut in FY2025-26E US$ revenue estimates.”

The report from Kotak further said, “Once the demand environment improves, we think Infosys has the pieces to deliver industry-leading revenue growth.” As of FY2026, we anticipate normalized growth. We have maintained our medium-term multiple of 24X Jun 2026E earnings for Infosys, which results in an FV of Rs1,750 (formerly Rs1,790). Continue to BUY.”

Wipro: Despite reporting a mixed result in Q4, the Azim Premji-backed company has improved over time.

Results for the fourth quarter show that Wipro’s PAT increased by 4.95% from Rs 2,694.2 crore in Q3FY24 but decreased by 8.5% from Rs 3,074.5 crore in Q4 of the previous year. Compared to Rs 22,205.1 crore in Q3FY24, consolidated revenue in Q4FY24 remained in flat at Rs 22,208.3 crore. Nevertheless, compared to Rs 23,190.3 crore in the same period last year, sales decreased by 4.4%. Revenue from the non-GAAP constant currency IT Services sector fell 6.6% YoY and 0.3% QoQ.

Wipro projects its IT Services business segment revenue for Q1FY25 to be between $2,617 million and $2,670 million. In constant currency terms, this corresponds to consecutive guidance of (-)1.5% to +0.5%.

Dividend: Wipro said that the interim dividend of Rs. 1 that the Board had previously announced at its meeting on January 12, 2024, will be regarded as the final dividend for the fiscal year 2023–2024 upon the release of its Q4 results.

Share Price: As of April 23, Wipro’s market capitalization was Rs 2,41,407.21 crore, and its share price was almost unchanged at Rs 462 each on the BSE. The stock’s 52-week high and low are, respectively, Rs 370.60 and 546.10 per share. Wipro’s YTD decline is 3.2% as well. On the NYSE, Wipro also has ADRs. And the ADR is down 1% YTD as of right now, at $5.510.

Recommendation: According to Motilal Oswal “Given WPRO’s weak 4Q exit and the near-term impact of the new CEO, we expect its FY25 revenue growth to be one of the lowest among Tier-1 IT Services peers.”

The brokerage went on, “We maintain our Neutral rating while anticipating 1) the new CEO’s performance and 2) a successful recovery from the company’s past ten-year problems before becoming more optimistic about the stock. Our INR490 TP suggests 18x FY26E EPS.”