---
endpoint: analytics
pattern: Technology
status: done
latency_ms: 180753
conversation_id: 85c6875e-c03b-4f2d-8578-58478b20819e
citations: 0
created: 2026-05-31 19:23:49Z
---

# How does Infosys’s valuation compare to peers, and what justifies its premium/discount?

## Infosys (INFY) Valuation vs Indian IT Peers

### Where Infosys Trades Today (as of CLSA's January–March 2025 read)

| Multiple Axis | INFY | Peer | Spread vs Peer | Historical Mean |
|---|---|---|---|---|
| **NTM PE (Jan-25)** | **~26.5x** [13] | TCS ~28.6x | **−7.6% discount** (narrowed) [5] | 7-yr avg discount −15.3% [5] |
| Same date | 26.5x | Accenture | **−10% discount** [6] | 6-yr avg −10% (back to mean) [6] |
| Same date | 26.5x | HCL Tech | **+5% premium** [3] / +2-9% [6][7] | 6-yr avg **−30% discount** (well above +2sd) [7] |
| **CLSA target multiple** | **26.6x** Q5-Q8 EPS [1][2] | TCS target 28x | −5% discount (target basis) [1][2] | — |

CLSA's Mar-2025 HK-roadshow snapshot tabulated the Indian IT pack on what appear to be current pricing/multiples: **INFY 30.2x, TCS 29.7x, LTIM 35.5x, PSYS 32.6x, WPRO 25.7x, TECHM 21.4x** [12].

Companies in coverage (Jan-16 levels): Infosys Rs 1,926 (HOLD), TCS Rs 4,208 (O-PF), HCLT Rs 1,792 (HLD), LTIM Rs 5,979 (U-PF) [9].

### Read-Through: Premium or Discount?

**1. Versus TCS — historical structural discount has narrowed sharply**
INFY's discount to TCS compressed to **−7.6% in Jan-25 (and −3% on the 16-Jan close)** versus a 7-yr average of **−15.3%** and a typical band of **−8.2% to −27.9% (±1sd)** [5][3]. INFY is trading near the **upper bound (less-discounted end)** of its historical relationship with TCS — i.e., INFY has re-rated to a relative premium vs its own history.

**2. Versus HCL Tech — outright premium, far above historical norm**
INFY shifted from a typical **~30% discount** to HCLT (6-yr average) to a **5% premium** as of mid-Jan 2025 after HCLT corrected post-3QFY25 results [3]. The reading sits **above +2 std deviation** from the 6-yr mean — historically rare territory [7][6].

**3. Versus Accenture (global benchmark) — reverted to long-term mean**
INFY's discount to ACN sat at **−10%**, matching the 6-yr mean of **−10%** [4][6]. INFY had briefly traded at a premium to Accenture (+6–9% in mid-2024), so the Jan-25 reversion implies mean-reversion from a stretched level [6].

**4. Versus mid-caps (LTIM, PSYS)** — INFY trades at a discount
LTIM (35.5x) and PSYS (32.6x) command higher multiples than INFY (30.2x) [12], reflecting their faster expected growth profile (and the discretionary-demand-exposure risk LTIM carries) [10].

### What Justifies INFY's Premium-ish Positioning (vs HCL/Wipro/TechM)

- **Best-in-class FCF conversion**: INFY converts **156% of PAT into FCF**, vs TCS 108% and HCLT 103% — by far the strongest cash quality in the large-cap pack [8].
- **SaaS / GenAI capability leadership**: CLSA's competency scoring ranks Infosys **#1 among Indian IT large-caps** in combined SaaS/SAP/Salesforce/hyperscaler capability (and #2-3 globally behind Accenture) — INFY scores 2 in Salesforce, 3 in SAP, ahead of TCS (7, 7), HCLT (8, 6), Wipro (6, 4) and TechM (9, 8) [10]. This frames INFY as the most-leveraged Indian IT name to SAP S/4HANA migrations and Salesforce/Agentforce roll-outs.
- **Resilient demand + AI optionality**: CLSA upgraded INFY to **O-PF from Hold on 7-Mar-2025**, citing valuation reset after correction + unchanged 4QFY25 demand outlook + INFY being "best-positioned around discretionary demand revival" with SaaS and Nvidia-ecosystem exposure [14].
- **GenAI execution**: Four small language models (SLMs) and 100 AI agents being deployed; no observed deflationary impact (unlike LTIM in 3QFY25) [11].

### What Justifies the Persistent Discount vs TCS (and the Hold-then-Upgrade arc)

- **Inferior FY26 EPS growth**: CLSA explicitly **prefers TCS to INFY** because TCS offers **higher FY26 EPS growth of 14%** vs INFY's lower trajectory; INFY EPS was cut 1–3% across FY25-27 on margin pressure from third-party pass-through costs [11].
- **Margin volatility**: 3QFY25 EBIT margin rose to 21.3% but was distorted by a 150bps third-party-cost spike; CLSA models 80bps margin contraction in 4QFY25 from wage hikes and visa charges [9].
- **Seasonality drag**: INFY-vs-TCS discount widens predictably in 2H — historical 7-yr 2H average discount is **−15%**, vs Jan-25's narrow **−5%** read — leaving room for renewed underperformance if seasonality bites [9].
- **Discretionary exposure = US recession risk**: At CLSA's Mar-2025 HK roadshow, investors flagged **INFY, WPRO and LTIM** as the **names most at risk** from postponed US discretionary demand if tariffs/policy uncertainty triggers a mild US recession [12].

### Valuation Methodology — CLSA's Anchor

CLSA values INFY at **26.6x Q5-Q8 EPS of Rs 74.4**, an explicit **5% discount to TCS's 28x target multiple** (the 5-year average for TCS) [1][2]. Target price **Rs 1,978** (HLD→O-PF rated 7-Mar-2025) [1][2].

### Bottom Line

Infosys's "premium" is **relative** — it trades at a small premium to HCL Tech (vs a normal 30% discount) and is back to mean with Accenture and TCS, having re-rated up from deep historical discounts. This is justified by **superior cash conversion (156% FCF/PAT), the best Indian-IT SaaS/SAP/Salesforce franchise, and clean GenAI execution** [8][10][11]. The persistent **structural 5% discount to TCS** in CLSA's target framework reflects **lower forward EPS growth (TCS FY26 +14%) and margin volatility from third-party cost intensity** [1][11]. The Mar-2025 upgrade was a tactical valuation call (recent correction + Q5-Q8 EPS basis = attractive), not a thesis change on relative quality.

---
**Sources**
[1] Infosys - O-PF (Resilient demand + attractive price) — CLSA (7 Mar 2025) — chunk_index 92 — 607952503LinqAlpha.PDF
[2] Infosys - HLD (More hits than misses) — CLSA (16 Jan 2025) — Valuation methodology table, chunk_index 72 — 607948386LinqAlpha.PDF
[3] Infosys - HLD (More hits than misses) — CLSA (16 Jan 2025) — Valuation Charts paragraph — 607948386LinqAlpha.PDF
[4] Infosys - O-PF — CLSA (7 Mar 2025) — Valuation Charts paragraph (chunk_index 81) — 607952503LinqAlpha.PDF
[5] Infosys - HLD — CLSA (16 Jan 2025) — Discount-INFO/TCS time series (chunk_index 64) — 607948386LinqAlpha.PDF
[6] Infosys - HLD — CLSA (16 Jan 2025) — Discount-INFO/ACCENTURE time series (chunk_index 67) — 607948386LinqAlpha.PDF
[7] Infosys - HLD — CLSA (16 Jan 2025) — Discount-INFO/HCLT time series (chunk_index 68) — 607948386LinqAlpha.PDF
[8] Infosys - HLD — CLSA (16 Jan 2025) — FCF to PAT conversion table (chunk_index 53) — 607948386LinqAlpha.PDF
[9] Infosys - HLD — CLSA (16 Jan 2025) — Companies mentioned + pricing — 607948386LinqAlpha.PDF
[10] Infosys - O-PF — CLSA (7 Mar 2025) — Overall SaaS ranking table (chunk_index 75) — 607952503LinqAlpha.PDF
[11] Infosys - HLD — CLSA (16 Jan 2025) — Lower EPS estimates / prefer TCS paragraph (chunk_index 10) — 607948386LinqAlpha.PDF
[12] India IT services (HK roadshow feedback: sour mood) — CLSA (16 Mar 2025) — Target prices/valuation table — 607953142LinqAlpha.PDF
[13] Infosys - O-PF — CLSA (7 Mar 2025) — NTM PE history table (chunk_index 82) — 607952503LinqAlpha.PDF
[14] Infosys - O-PF — CLSA (7 Mar 2025) — Document overview — 607952503LinqAlpha.PDF

