HCL Technologies Ltd overtook Cognizant Technology Solutions Corp on Thursday to become the fourth India-centric IT services company, with the market capitalization of the Noida-based company overtaking Cognizant, highlighting the challenges facing the Nasdaq-listed company under the chief. executive Brian Humphries.
Cognizant, based in Teaneck, New Jersey, appointed Humphries to succeed Francisco D’Souza on February 6, 2019, and for the past thirty months, the former Vodafone executive has struggled to lead Cognizant as the growth and profitability have lagged behind its local peers, consequently impacting the company’s market capitalization.
On Wednesday, Cognizant stock closed at $ 73.56 on the Nasdaq, giving the company, which has more than two-thirds of its nearly 300,000 India-based employees, a market cap of $ 38.84 billion. Thursday morning, the HCL Technologies share traded at ₹1061 at 9.41am on the Bombay Stock Exchange, resulting in a market capitalization of $ 39 billion.
Cognizant shareholders did not get much return under Humphries watch, as the shares generated a 2% return between February 6, 2019 and August 4, 2021. This despite the company spending $ 2.1 billion. last year and $ 2.7 billion in 2019 in share buybacks and dividends.
Cognizant, which follows a January-December fiscal year, closed with revenue of $ 16.65 billion last year, as for the first time annual revenue fell 0.76% against 16.78 billion dollars at the end of December 2019. Its operating margin fell by 190 basis points. from 14.6% to 12.7%.
To be sure, Cognizant has had the fastest annual revenue growth in 14 of the last 22 years since its IPO in 1998, according to an analysis by Mint.
HCL Technologies, headquartered in Noida, grew 2.4% in the fiscal year ended March 31, 2021, after growing 15% in 2020. The company managed to improve its operating margin by 180 basis points, from 19.6% to 21.4%.
Strong performance, a stable management team and an acquisitions-driven approach have allowed HCL stock to more than double in this period, yielding 105% over the past thirty months.
In contrast, Humphries has struggled to build a leadership team, as the company continues to see an exodus of executives. Muthu Kumaran, senior vice president and head of global delivery, Cognizant Digital Business, filed his papers last month, according to two executives familiar with the development. The departure comes after Malcolm Frank, executive vice president and president of Cognizant Digital Business, left the company in June.
In the April-June quarter, Cognizant’s attrition rate reached 31%, implying that almost one in three company employees left the company in the past twelve months.
Cognizant and HCL Technologies expect double-digit revenue growth for the current year.
Tata Consultancy Services Ltd, the world’s largest IT services company, leads the pack with a market cap of $ 164 billion, followed by Infosys Ltd and Wipro Ltd, which have a market cap of $ 96 billion and 46 billion, respectively. $ 5 billion.
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