Infosys Ltd ADR (INFY), Wipro Limited (ADR) (WIT): Is This Indian IT Company Worth Buying?

Another rival, Wipro Limited (ADR) (NYSE:WIT), is experiencing trouble in its business. In the first quarter, Wipro Limited (ADR) (NYSE:WIT)’s revenue increased a marginal 0.5% as the company cited weak government and telecom spending. Moreover, management is actually guiding for revenue growth between -0.6% and 1.6% for this fiscal year, which is very depressing when compared to the expected industry average of 12% to 14% that is expected by the National Association of Software and Services Companies.

Cognizant Technology Solutions Corp (NASDAQ:CTSH) is another major player in the IT space in India. Cognizant leapfrogged Infosys last year in terms of Global IT ranking as it grew 20% between 2011 and 2012. Cognizant Technology Solutions Corp (NASDAQ:CTSH) has seen solid growth in recent times. Its revenue rose 18% in the previous quarter; its next earnings report is scheduled for August 6. Taking the company’s most recent results into context, however, Cognizant had seen solid earnings growth of 17% which is far ahead of the growth that Infosys had achieved.

To sum things up, Wipro Limited (ADR) (NYSE:WIT) is in the stickiest situation of the lot while Tata Consultancy seems best positioned along with Cognizant. We cannot count out Infosys, however, as the company has some strategies in place to accelerate growth.

Guidance and final words

Infosys expects that its annual revenue in dollars would increase 6% to 10% this year, though analysts expect a cut. The company had seven contract wins during the first quarter that were worth $600 million. “We are definitely more aggressive in going after growth and are definitely making progress in our efforts to win large IT outsourcing deals,” said Mr. S.D. Shibulal, Infosys’ Chief Executive Officer.

The major headwinds for Infosys are cut-throat competition, higher subcontracting costs, lower pricing, and a possible change in U.S. visa legislation that could make it more costly and difficult to send workers to the country. The company is aggressively moving ahead with its market strategies by focusing on winning large outsourcing deals, however, despite negativities ahead resulting from low margins. Even though it may cause margin pressure in the short and medium term, the company believes that it can work on things like automation and other efficiencies to improve in the long term.

The article Is This Indian IT Company Worth Buying? originally appeared on Fool.com and is written by Amal Singh.

Amal Singh has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Amal is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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