Accenture Earnings Imply Improving Business Environment For Indian IT Firms

Accenture Plc has raised the lower end of its revenue growth guidance, indicating improving confidence as economies around the world cautiously open after months of freeze amid the new coronavirus pandemic. And that bodes well for the sentiment of Indian information technology companies as well.

The New York-listed tech firm—that follows the September-August fiscal—revised its full-year revenue growth estimate to 3.5-4.5% from 3-6% earlier, according to a statement. Its revenue in the quarter ended May rose 1.3% year-on-year to $11 billion.

Its earnings per share declined 2% at $1.9. The company also revised its EPS forecast to $7.57-7.7 from $7.48-$7.7 earlier.

“Accenture’s commentary resonates with our recent conversations with its India peers of a month-on-month improvement in operating environment and growing deal discussions,” CLSA said.

According to Motilal Oswal, a stronger-than-expected commentary from the management sets an encouraging tone for the impending first quarter of 2020-21 earnings. Accenture’s revenue was led by 5% growth in its outsourcing segment, with new bookings and highest deal signings, the brokerage said. Despite the lockdowns and employees working from home, the drop in utilisations was not as damaging to operating margin, it said. That, according to Motilal Oswal, should calm the nerves of Indian IT investors.

Still, some concerns remain.

The outlook may have been positive but Accenture did suggest there was a delay in client decisions on deals and execution, and some deferment of work.

According to CLSA, clients cutting back on IT budgets could sustain pressure on the legacy businesses of Indian companies. A flattish communications, and banking, financial services and insurance verticals indicate tight IT spending, which may partially weigh on Tech Mahindra Ltd., Infosys Ltd., Tata Consultancy Services Ltd. and Wipro Ltd.