Aggregate gross margins
of Tier-I IT companies plunged by 370bp to 37.7% during FY14-19 from earlier
41.5%. Within Tier-II, aggregate gross margins declined by ~290bp, but the dip
was not as uniform as seen in Tier-I companies due to bottom-up company specific
factors. TCS and INFY both contributed to the downward trend. While
employee costs played truant in the case of TCS, sub-contractor expenses hurt
INFY. Further, investments in Digital capabilities and pressure in traditional
contracts too played a part in the declining gross margin trend.