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Tuesday, December 01, 2020

Covid-19 effect on IT firms: Travel bills down, but communication costs increase

Before Covid-19 struck businesses, travel was the third biggest expenditure head for the IT majors, lagging only behind employee cost and fee to technical sub-contractors/external consultants.

Written by Sandeep Singh | New Delhi | July 17, 2020 3:15:05 am
Among the three companies, Infosys witnessed the biggest — 86 per cent — drop in travel expenditure, down from Rs 827 crore in June 2019 to Rs 116 crore in June 2020. (File)

With the Covid-19 pandemic halting travel and forcing people to work from homes, Indian IT majors TCS, Infosys and Wipro have been witnessing an interesting trend: While their travel expenditure has fallen by up to 86 per cent in the June quarter, their bills on communication have seen a 20 to 30 per cent increase.

According to data sourced from the companies’ quarterly results, while the aggregate travel expenditure for the three companies declined from Rs 2,153 crore in the quarter ended June 2019 to Rs 500 crore in June 2020, the reliance on video-conferencing in the time of social distancing saw their communication expenditure rising to Rs 742 crore at the end of this quarter, compared to Rs 600 crore in the corresponding period last year.

Before Covid-19 struck businesses, travel was the third biggest expenditure head for the IT majors, lagging only behind employee cost and fee to technical sub-contractors/external consultants.

In fact, in the quarter ended June 2020, communication expenditure for each of the three companies was higher than their travel bills. In June 2019, communication cost was only about a quarter of travel expense for each of these companies.

Among the three companies, Infosys witnessed the biggest — 86 per cent — drop in travel expenditure, down from Rs 827 crore in June 2019 to Rs 116 crore in June 2020. The communication expense for the company rose 28 per cent — from Rs 127 crore to Rs 163 crore — in the corresponding period.

For TCS, while the travel expense came down by 69 per cent year-on-year, the communication expense rose 22 per cent. For Wipro, the travel expense fell 75 per cent and the communication expense went up 26 per cent.

In a quarter where companies have suffered a fall in revenue, the drop in travel cost has helped them maintain their profit growth, or at least limited the drop in profit during the quarter.

For Infosys, while the revenue growth was 8.5 per cent y-o-y, the net profit jumped 12.4 per cent. In case of Wipro, the revenue grew by 1.3 per cent but the profit after tax (PAT) grew 8.8 per cent. In case of TCS, while revenue expanded marginally by 0.4 per cent, the profit declined 13.5 per cent.

In line with the growth in profitability in the quarter ended June 2020, Infosys and Wipro have seen a sharp jump in their share prices over the last two days. Infosys’s share price has jumped 16.6 per cent between Tuesday and Wednesday and shares of Wipro jumped 17 per cent on Tuesday.

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