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KRChoksey Report
Covid-19 impacted sequential revenue growth on supply and demand side.
Revenue for the IT firms under our coverage declined 2-7% QoQ in U.S. dollar terms (2-8% QoQ decline in constant currency terms), which was largely along expected lines with the notable exception of Persistent Systems Ltd., which saw a healthy 3.1% QoQ U.S. dollar revenue growth, and Infosys Ltd., which reported a lower-than-expected 2% constant currency QoQ revenue dip (2.4% QoQ U.S. dollar revenue decline) YoY U.S.dollar revenue dipped 3-8% for most firms except Persistent Systems (9.5% growth), Infosys and HCL Technologies Ltd. (both flat).
Owing to the Covid-19 pandemic, around 20-25% of the revenue decline in Q1 FY21 was impacted by supply-side issues (time to shift employees to a work from home model), with the balance 75-80% due to demand side issues across verticals.
All the IT firms under our coverage alluded to sequential revenue growth returning from Q2 FY21 onward, as major countries emerge from lockdown and restart their economies.
The criticality of technology to most firms operations across verticals, along with further rise in digital and cloud spend post the pandemic is likely to drive growth recovery from Q2 onward.
However, the situation remains fluid and the pandemic is far from over; thus, recovery needs to be viewed with a hint of caution.
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