Indian IT companies — TCS, Infosys, Wipro, HCL Tech, Tech Mahindra, Persistent, Coforge — share a revenue model that is fundamentally different from any other sector: they sell human hours of technology expertise to global clients on 3-5 year service contracts. The business is not capital-intensive (no factories, no inventory) but it is talent-intensive — and talent quality, talent retention, and talent utilisation are what drive profitability. Understanding an IT company's financial results requires a different analytical lens from understanding Tata Steel's or Asian Paints' results. The metrics that matter most are not on the face of the P&L — they are in the management commentary, the employee headcount disclosures, and the deal win announcements.
TCV: The Most Important Leading Indicator in IT
Total Contract Value (TCV) is the aggregate value of all new client contracts signed in a quarter, measured over the full contract duration. If TCS signs a ₹5,000 crore 5-year managed services contract with a US bank, that ₹5,000 crore flows into TCV in the quarter of signing — but the actual revenue of ₹1,000 crore per year flows into quarterly P&L over 5 years. This is why TCV is the leading indicator: strong TCV today means strong revenue growth 12-24 months from now. Weak TCV today means revenue headwinds 12-24 months from now, even if current revenues are still growing. The BBS IT analysis rule: always track TCV momentum over 3-4 quarters, not just the single quarter. A company that has signed ₹20,000 crore of TCV per year for 3 consecutive years has a fundamentally better revenue visibility than one that signed ₹25,000 crore in one exceptional quarter. Large deal TCV (contracts above $50 million) is separately disclosed by most large IT companies — large deals signal that the company is winning transformational mandates from major global clients, which carry better longevity and better margin as the delivery ramps. Our analyses of TCS vs Infosys, Persistent Systems, and Coforge each use TCV momentum as a primary analytical input — it is the single number that best explains why growth rates diverge between companies in the same IT sector even when macro conditions are identical for all of them. Use the BBS Stock Scorecard on any IT company — but supplement it with the TCV trend from quarterly earnings presentations, which are published on company investor relations pages after each result.
- TCV above 1.2x quarterly revenue = backlog building (positive)
- TCV below 0.8x quarterly revenue for 2+ quarters = backlog erosion (negative)
- Large deal TCV (>$50M each) = high-visibility, long-duration contracts that anchor future growth
- Ramp-up lag: new TCV typically converts to P&L revenue 2-4 quarters after signing
Attrition: The Health of the Delivery Engine
Attrition rate (annualised) = (employees who left in the quarter × 4) ÷ average headcount × 100. This is the percentage of the workforce that quits every year. IT company delivery depends entirely on experienced employees who know the client systems, the delivery processes, and the account context. When attrition rises above 20-25%, the company is losing institutional knowledge faster than it can rebuild it — leading to delivery quality issues, customer dissatisfaction, and margin pressure from expensive replacement hiring. The 2021-22 period was the clearest demonstration: Indian IT attrition spiked to 20-30%+ across the sector as employees switched companies for 30-50% salary hikes. Companies had to counter-offer aggressively, hire at inflated salaries, and absorb training costs for new joinees — EBIT margins compressed 2-4% across TCS, Infosys, Wipro, and HCL Tech during this period. When attrition normalised by FY24, margins recovered. The BBS attrition benchmark: below 12-14% is healthy for large IT companies; 14-18% is elevated but manageable; above 20% for 2+ consecutive quarters signals structural talent pressure and is a margin risk flag. Track the attrition trend (improving or worsening) more than the absolute level. Use the BBS Red Flag Detector on IT companies — persistently high attrition combined with margin compression and slowing TCV is the most reliable early warning of a difficult 2-3 year period ahead for an IT company's earnings.
Utilisation Rate: How Much Slack Is in the System
Utilisation rate = (billable employee hours ÷ total available employee hours) × 100. It measures what percentage of the delivery workforce is actually billing to client projects at any given time. High utilisation (85-88%) means the company has almost no bench — every trained employee is deployed and billing. This maximises short-term revenue but leaves no buffer for ramp-up on new deals without hiring. Low utilisation (72-76%) means the company has significant bench capacity — employees trained and available but not currently billing to clients. This compresses margins in the short term (paying salaries for non-billable employees) but provides the flexibility to onboard new large deals quickly without a hiring lag. The BBS framework: utilisation is a contra-indicator for near-term margin vs medium-term growth. When utilisation is very high (86-88%) and TCV is strong, the company will need to hire aggressively to deliver new contracts — expect margin pressure as fresh campus hires (lower billing rate, higher training cost) dilute the billable mix. When utilisation is low (72-75%) and TCV improves, the bench fills new deal ramp-ups before expensive lateral hiring is needed — expect margin expansion. Read our Wipro vs HCL Tech analysis and Tech Mahindra turnaround analysis to see how utilisation cycles drove the margin recovery stories at both companies.
Onsite-Offshore Mix and EBIT Margin: The Cost Structure
Onsite revenue: work performed at the client's location (US, Europe, Middle East) — billed at $80-150 per hour, but employee cost is also high ($100,000-200,000+ annual salary in the US). Offshore revenue: work performed from India — billed at $20-40 per hour, with employee cost of $15,000-25,000 per year. The EBIT margin on offshore work is structurally 3-4x higher than onsite. As a company shifts more work offshore (better delivery processes, client trust, technology automation), its EBIT margins expand structurally. The Indian IT margin story of 2010-2018 was largely this offshore shift — from 60% offshore to 75-80% offshore — as clients grew comfortable with remote delivery and Indian companies built the infrastructure to manage global delivery. Today, offshoring has largely plateaued for large cap IT, and margin expansion must come from other sources: automation, AI, Gen AI productivity tools, and premiumisation (moving up the value chain from commodity maintenance to high-value transformation work). Use the BBS PE Analyser on any IT company and look at the implied earnings growth rate — IT companies at 22-25x PE are priced for 10-12% earnings growth, which requires a combination of 8-10% revenue growth and stable-to-improving margins. If a company is showing attrition pressure and utilisation compression simultaneously, the margin component of that growth forecast is at risk.
Vertical Mix and Geography: Understanding What Drives Growth
Indian IT revenue is reported by vertical (BFSI — Banking, Financial Services, Insurance; Retail & Consumer; Manufacturing; Healthcare & Life Sciences; Energy & Utilities; Communications, Media & Technology) and by geography (North America, Europe, Rest of World). BFSI is typically the largest vertical at 25-35% of revenue for most large IT companies — and it is the most volatile. When global banks are cutting technology spend (as in 2023, post-Silicon Valley Bank failure), BFSI-heavy IT companies underperform; when banks are investing in digital transformation and regulatory technology (as in 2024-25), BFSI-heavy IT companies outperform. Geography watch: North America is 55-65% of revenue for TCS, Infosys, and Wipro. European business is the second-largest at 25-30%. When the US economy slows (high interest rates, tech sector layoffs), US client discretionary IT budgets are cut first — and Indian IT companies feel it immediately. The 2023 IT sector slowdown in India was almost entirely US-BFSI-discretionary spend contraction. By tracking the leading indicators of US IT budget cycles — CIO surveys, Gartner IT spending forecasts, US bank earnings commentary on technology investment — BBS investors can anticipate the sector's direction 1-2 quarters ahead of the revenue data. Read our TCS valuation cycle analysis for a complete case study of how PE multiple cycles in IT track against these macro IT spending indicators. Enrol in BBS IT sector courses for a complete quarterly results analysis template applied to TCS, Infosys, and Persistent — covering how to read every line of the earnings presentation and management commentary.
🔍 BBS Insight
The BBS IT company checklist for every quarterly result: (1) TCV growth — is the deal win rate above 1.0x quarterly revenue? (2) Large deal count — are $50M+ deal wins increasing or stagnant? (3) Attrition trend — is it improving or worsening from last quarter? (4) Utilisation — above 84% (near-term margin risk) or below 78% (short-term margin drag, medium-term ramp capacity)? (5) EBIT margin guidance — was it maintained, raised, or cut? (6) Management commentary on discretionary spending — are clients releasing frozen budgets or further deferring projects? A company that passes all six checks is almost certainly in an earnings upgrade cycle. A company that fails three or more is in an earnings risk cycle regardless of how good the trailing 12 months looked. The most important single paragraph in any IT company's quarterly result is the CEO's commentary on "demand environment" — this is where management signals whether client conversations have improved or deteriorated, which determines whether the next quarter's TCV will be strong or weak. Read it before looking at any number in the P&L.