CFO Bridge Insights June 2025

Benchmarking Profit: P&L Insights from Top Indian IT Services Companies & FY25 PAT Waterfall

Benchmarking Profits: A Deep Dive into Indian IT Services P&Ls

Indian IT services companies consistently publish quarterly financials in a structured format—an invaluable source for deriving benchmark insights. For this analysis, we’ve compiled the Consolidated INR P&L statements for FY25 (year ending March 31, 2025) from leading players including TCS, Infosys, HCLTech, Wipro, LTI Mindtree (LTIM), Persistent Systems, and L&T Technology Services (LTTS). Only publicly available data has been used across all companies.

To ensure consistency and comparability:

• Revenue and Other Income have been combined and presented as Total Income, with all key line items expressed as a % of Total Income.

• Cost items have been logically grouped, and exceptional or inconsistent items are categorized under Other Expenses.

Every effort has been made to ensure accuracy and present a reliable benchmarking reference. Any minor classification limitations are unintentional and stem from publicly available data constraints.

We hope you find this analysis insightful and practical for your own P&L evaluation and performance improvement efforts.

P&L Comparison for YE 31st March 2025:

Employee Benefit Expenses & Outsourced Cost:

IT Service companies, deliver their work using own employees ( permanent) and contract or contingent work force. Additionally in Managed service projects they may outsource some portion of work to third party service providers. Outsourced costs include  Contract employees, technical/project consultants and third-party services. When drawing inference, it is suggested to combined both the costs.

• TCS and Infosys are at 61%. Rest of the companies are ranging 66% to 71%, this reflects in the gap in PAT. These companies need to work to narrow the gap. This would mean can they re-negotiate the outsourced contracts, reduce the third-party consultants and add as regular employees if business is certain.

• TCS and Infosys was 63- 64% in FY22, and they have progressively reduced to 61%.

• LTIM was 68% in FY22 and 70% in FY25, while other companies were flat or marginally down between 1-2%

Cost of Equipment and Software licenses:

Most of the companies, have HW and SW sales which can be part of managed services cost or system integration deals. This would improve top line but relatively have a lower margin compared to IT services business. If these companies are selling own software or SAAS products margin can be slightly better, but they would have to invest on maintenance and new development to sustain this income. Wipro, HCLTech and LTTS are 0-3% level and lower end on relative comparison.

Facility cost:

Facility cost is in the range of 0.5% to 1% for Persistent, Infosys, HCLTech. Probably it is due to own facility. While rest of companies ( TCS , Wipro, LTIM, LTTS) are in the range of 1.3% - 1.7%.

Comparison between FY22 and FY25, interesting to note that it has dropped 0.1% in case of Persistent, HCLTech and Infosys. Rest of the companies have increased between 0.1% to 0.3%. Quite possibly rentals would have increased.

Travel expenses:

Interestingly except LTTS at 2.4%, travel expenses range from 1.1% to 1.5% for rest of the companies.

Communication expenses:

Interestingly except TCS at 0.9%, communication expenses range from 0.2% to 0.5% for rest of the companies. Not sure if there is any classification issue here or any reason for higher spend by TCS.

Other expenses:

Persistent, Infosys, HCLTech and LTIM are in the range of 1.8% to 2.8% and TCS 3.7%, Wipro 4.2% and LTTS 7.2% ( includes 3% increase in other operating expenses)

Depreciation & Amortization:

This is in the range of 2 – 3.4% across all companies.

Finance cost:

This is in the range of 0.2% – 0.7% across all companies except Wipro which is 1.6%.

Effective tax as a % of PBT:

This is in the range of 23.2% to 29%. This would be increasing as and when the tax benefit dries out.

PAT Waterfall:

TCS achieved a PAT margin of 18.8% in FY25, setting a clear benchmark in the Indian IT services landscape. Each of the other six major IT firms shows distinct reasons for variance, which we’ve mapped through a PAT Waterfall analysis—TCS vs. each peer.

This comparative view helps pinpoint specific cost or revenue drivers influencing profitability. Whether you're a large IT firm or an SME, benchmarking your P&L against these insights can reveal actionable areas for margin improvement.

FY25 PAT Waterfall : TCS vs. Infosys:

Infosys’s combined spend on resource and outsourced costs is 0.38% lower than TCS, a net advantage. However, while resource costs are 4.63% better, this benefit is offset by higher outsourced spend, eroding the edge. Notably, both Infosys and TCS have improved efficiency—reducing this combined spend by ~3% between FY22 and FY25.

A key profitability concern is Infosys’s rising spend on HW/SW license sales, now at 9.6% of total income—the highest among peers and up from 5.5% in FY22. Given the typically lower-margin nature of this business, this shift has a likelihood of diluting overall margins, while we are not sure of the margin for this business. Even TCS has increased from 0.6% in FY22 to 4.5% in FY25, indicating there is a pressure for both companies to take this nature of business.

On the positive side, Infosys enjoys favourable spends compared to TCS in: Facility cost: 0.41% ; Communication cost: 0.54% and Other expenses: 1.81%

These efficiencies help narrow the PAT gap and should be sustained going forward.

To further strengthen profitability, Infosys should reassess its revenue mix—particularly the growing HW/SW component—and explore structural or operational optimizations to maintain competitiveness with TCS.

FY25 PAT Waterfall : TCS vs. HCLTech:

HCLTech’s combined spend on resource and outsourced costs is 7.79% higher than TCS. While own resource costs are marginally lower by 0.38%, outsourced spend is significantly higher by 8.17%. This is likely to be influenced by HCL’s infrastructure services portfolio, which involves outsourced third-party service costs—making direct comparisons more complex.

That said, the combined spend has risen from 67.6% in FY22 to 68.5% in FY25, while TCS has improved efficiency by reducing this from 63.8% to 60.7%—a 4% advantage at the PAT level.

At the PAT level, both companies saw a marginal decline between FY22 and FY25—HCLTech by 1% and TCS by 0.8%—but for different reasons:

• HCLTech benefited from lower depreciation, cushioning the drop.

• TCS saw a margin impact from higher HW/SW sales and increased other expenses offsetting the advantage gained from reduction in resource cost+ outsourced cost combined.

The effective tax rate for both remains similar at ~25%, offering no comparative advantage, and as PBT grows, tax as a percentage of total income will normalize further.

To narrow the PAT gap, HCLTech must focus on optimizing outsourced costs, or rationalizing resource cost/deployment. With limited upsides available across other levers, cost efficiency in delivery remains key to improving profitability.

FY25 PAT Waterfall : TCS vs. Wipro:

Wipro’s combined spend on resource and outsourced costs is 7.45% higher than TCS, with the bulk of the gap driven by outsourced costs. While own resource costs are largely in line, outsourced cost remains an area for optimization.

Wipro has made progress—reducing outsourced spend from 13.3% in FY22 to 10.8% in FY25, yielding a 2.5% PAT improvement. However, TCS outpaced this with a 4.4% reduction over the same period (from 8.9% to 4.5%). To close the PAT gap, Wipro must continue its focus on cost rationalization, particularly in outsourced resource cost/services.

Other key insights:

• Hardware/Software costs appear negligible—potentially a strategic advantage, as these are typically low-margin revenue streams.

• Communication cost is 0.5% lower than TCS, contributing positively and worth maintaining.

• Finance cost stands at 1.6% of Total Income, the highest among peers. This suggests a need for improved working capital and treasury management to bring costs in line.

• While effective tax rate is currently favourable at 24.5%, this is unlikely to be a long-term advantage and should not be relied upon.

To bridge the PAT gap with leaders like TCS, Wipro must continue optimizing outsourced costs, reduce finance costs, and sustain operational efficiencies.

FY25 PAT Waterfall : TCS vs. LTIM:

LTIM’s combined spend on resource and outsourced costs is 9.15% higher than TCS, with outsourced costs up by 2.24% and own resource costs higher by 6.91%. This deviation—also above peer levels—calls for a root cause analysis to identify optimization levers.

Key areas to examine:

• Business mix: If onsite work is disproportionately high, consider shifting from T&M to managed services, enabling greater offshoring and margin improvement.

• Utilization: Address possible underutilization either onsite or offshore.

• Operational inefficiencies: Investigate potential issues like unbilled resources, over-deployment, project overruns, or excess bench strength. Study this Offshore and Onsite separately. Also examine whether the pyramid mix of project staffing is at ideal level, explore opportunities to infuse freshers like TCS to bring the average resource cost down.

On the positive side, communication (0.64%) and other costs (0.94%) are lower than TCS, offering a margin upside. However, while the tax as a % of total income appears favourable, the effective tax rate is aligned with TCS, offering no real tax advantage.

To close the PAT gap, operational efficiency and delivery model rebalancing should be strategic priorities going forward.

FY25 PAT Waterfall : TCS vs. Persistent:

Persistent's combined spend on resource and outsourced costs is 10.66% higher than TCS, making it the primary driver behind the PAT gap. This highlights a clear opportunity to optimize outsourced cost structures to improve profitability.

On the upside, facility (0.88%), communication (0.75%), and other operating costs (1.58%) are favourable compared to TCS, contributing positively to PAT. These cost advantages should be protected and sustained.

Notably, the effective tax rate stands at 23.2%, currently offering a margin benefit. However, this is expected to converge with peer averages over time, reducing its relative advantage. Persistent will need to proactively identify & act on new levers to sustain and grow profitability in the coming years.

FY25 PAT Waterfall : TCS vs. LTTS:

LTTS shows a 5.56% higher combined spend on resource and outsourced costs compared to TCS, driven in part by a 5.7% spend relating to engineering and technical consultancy. Travel expenses are also notably higher than peers, indicating potential for at least a 1% reduction through tighter budgetary controls, which could directly enhance PAT.

Additionally, other operating expenses—around 4% of Total Income—have increased in FY25. While granular details aren't available, if these are one-off items, they could normalize in future periods, offering further upside to profitability.

On a positive note, communication costs are lower than TCS, a trend that, if sustained, can continue to support PAT margins.