HCL Technologies Ltd surpassed Cognizant Technologies Solutions Corp. to become the fourth-most valuable India-centric information technology (IT) services company on Thursday, as the Noida-based firm’s market capitalization surpassed Cognizant’s, highlighting the Nasdaq-listed firm’s challenges under chief executive Brian Humphries.
Cognizant, based in Teaneck, New Jersey, appointed Humphries as the company’s successor to Francisco D’Souza on February 6, 2019, and the former Vodafone executive has struggled to steer Cognizant over the last thirty months, as both growth and profitability have lagged behind its homegrown peers, affecting the company’s market cap.
Cognizant’s stock closed at $73.56 on Nasdaq on Wednesday, giving the company a market cap of $38.84 billion. More than two-thirds of Cognizant’s nearly 300,000 employees are based in India. HCL Technologies shares were trading at 1,061 on the Bombay Stock Exchange at 9:41 a.m. on Thursday, translating to a market capitalization of $39 billion.
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Cognizant stockholders haven’t gotten much of a return under Humphries’ supervision, with shares returning only 2% between February 6 and August 4, 2021. This is despite the corporation spending $2.1 billion on share repurchases and dividends last year and $2.7 billion this year.
Cognizant, which has a January-December fiscal year, had $16.65 billion in sales last year, down 0.76 percent from $16.78 billion at the end of December 2019. Its operating margin shrank from 14.6 percent to 12.7 percent, a drop of 190 basis points.
To be sure, since becoming public in 1998, Cognizant has had the fastest full-year revenue growth in 14 of the last 22 years, according to a Mint study.
HCL Technologies, based in Noida, reported a 2.4 percent increase in revenue for the year ending March 31, 2021, following a 15 percent increase in 2020. The company was able to increase its operating margin from 19.6 percent to 21.4 percent by 180 basis points.
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Strong performance, a stable leadership team, and an acquisition-led strategy have all helped HCL shares more than double in value over the last thirty months, returning 105 percent.
In contrast, Humphries has struggled to build a senior leadership team, as the company continues to see an exodus of leaders. Muthu Kumaran, a Senior Vice President and Global Delivery Head, Cognizant Digital Business, put in his papers last month, according to two executives familiar with the development. This departure comes after Malcolm Frank, an Executive Vice President and President of Cognizant Digital Business leaving the company in June.
Cognizant’s attrition rate increased to 31% in the April-June quarter, meaning that nearly every third employee left the organisation in the previous year.
In the current year, both Cognizant and HCL Technologies forecast double-digit revenue growth.
The largest IT services business, Tata Consultancy Services Ltd, with a market capitalization of $164 billion, followed by Infosys Ltd and Wipro Ltd, which have market capitalizations of $96 billion and $46.5 billion, respectively.
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