Q3 Results Preview: Large Deal Wins To Lift Top Indian IT Firms’ Revenue
India’s biggest software services exporters may report a rise in revenue for the second straight quarter, aided by large deal wins and digital transformation as the economy tries to turn around from a pandemic-induced recession.
Analysts estimates compiled by Bloomberg pegged the aggregate revenue of the five information technology companies on the Nifty 50 — Tata Consultancy Services Ltd., Infosys Ltd., HCL Technologies Ltd., Wipro Ltd., and Tech Mahindra Ltd. — to increase 2.46% sequentially in the October-December period. Cumulative net profit is expected to rise 6% over the preceding three months.
That’s in line with Nomura’s estimate of a 2.6% quarter-on-quarter aggregate revenue growth in constant currency for tier-1 IT companies. “We expect 20-40 basis points from cross-currency for tier-1 IT and 20 basis points benefit for mid caps, led by appreciation in all major currencies against the U.S. dollar,” Rishit Parikh, an analyst at Nomura, said in a note.
The optimism stems from Accenture Plc’s move to raise its revenue growth guidance for FY21 to 4-6% from 2-5% earlier, and improving demand outlook. The information technology companies were among the worst hit after the pandemic stalled trade and forced employees to work from work, raising costs. The firms even lost billings as they generate most of their business overseas and the bulk of it comes from clients in financial services, manufacturing and communications sectors. The sector, however, rebounded in the second quarter, aided by large deal wins and client spending on cloud computing, artificial intelligence and internet of things.
TCS will kick-start the third-quarter earnings season on Jan. 8, 2021.