Q4 Preview: Deal Wins, Outlook To Buoy IT Firms As Growth Normalises
Revenue of India’s biggest software exporters are expected to rise for the third straight quarter as they continue their digital transformation towards a post-Covid world amid a second wave of the pandemic.
Analysts estimates compiled by Bloomberg expect 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 2.74% sequentially in the quarter ended March. Net profit, however, is expected to decline 3% over the preceding three months.
That’s at the higher end of the range forecast by research firm CLSA which expects organic, constant currency revenue growth of 1.4-2.8% for India’s top five I.T. companies. “While this may appear soft after back-to-back quarters of nearly 4% average growth, it may get overlooked as order books likely remain healthy and management commentaries stay positive,” Pankaj Kapoor, analyst at the brokerage, wrote in his sectoral preview note.
Nomura is anticipating a 50-70-basis-point benefit from cross currencies. It also expects growth momentum in top-tier companies to continue, led by ramp-up of large deals. “We believe all companies will report a positive year-on-year constant currency revenue growth in Q4, with Infosys likely to lead with double-digit growth and Wipro to lag with flattish growth,” Rishit Parikh, analyst at the research firm, wrote.
The optimism stems from Accenture Plc.’s improved results for the second consecutive quarter. The company raised its FY21 revenue growth guidance to 6.5%-8.5% from 4-6% previously. Analysts had then said the American technology firm’s performance and second upward revision in revenue guidance will augur well for Indian peers.