Accenture Results Bolster Prospects Of A Recovery For Indian IT Companies
Accenture offices are seen in Bengaluru. (Photographer: Namas Bhojani/Bloomberg News.)

Accenture Results Bolster Prospects Of A Recovery For Indian IT Companies

Analysts see Accenture Plc’s aim to return to its pre-pandemic growth rates, single digits or low double digits, in the second half of the fiscal 2021 as a positive for Indian information technology companies.

The New York-listed IT company missed estimates in the three months ended August, and expects two more quarters of low growth, indicating that the disruption from the Covid-19 pandemic will last longer even as demand for digital services rises.

Revenue of Accenture—that follows September-August fiscal—fell 2% sequentially to $10.84 billion in the fourth quarter, according to the consulting and tech firm’s filings. Its revenue from consulting fell 8% to $5.68 billion, while outsourcing revenue rose 6% in dollar terms and 7% in local currency to $5.15 billion.

Still, most brokerages see a positive read-through of Accenture’s guidance and order book.

Here’s what brokerages have to say:

Nomura

  • Accenture’s fourth quarter results were below street expectations
  • Sees a neutral to positive read-across for India IT sector
  • Consulting led weakness; traction in outsourcing was strong
  • Booking activity robust in the outsourcing business
  • First quarter guidance suggests improving demand
  • Stressed verticals contribute 30-35% of revenue for India IT firms
  • Cloud remains a key area of focus over the next five years

Jefferies

  • Accenture’s fourth quarter revenue at the midpoint of guidance
  • A strong revival in new bookings to $14 billion is a key positive
  • Management expects growth to pick up to pre-Covid levels from second half of FY21
  • Sees acceleration in digital transformation and cloud migration as medium-term growth drivers
  • Tier-I Indian IT firms favourably positioned to leverage the growth drivers
  • Pick-up in growth from quarter ended May aligned with expectations of tier-I Indian IT firms
  • Continues to like Indian IT services with Infosys as the top pick

Motilal Oswal

  • Accenture’s FY21 guidance and order book is encouraging
  • Guidance positive for Indian IT companies
  • Guidance solidifies expectations of better FY22 outlook
  • Fourth quarter revenue largely in line with consensus estimates
  • Second half of FY21 is expected to see high single digit to low double-digit growth
  • Revenue guidance for the next quarter stands at $11.1-11.55 billion versus a consensus estimate of $11.54 billion
  • Revenue guidance implies slightly elongated recovery in the near term

Emkay Global

  • Fourth quarter misses estimates due to slight weakness in consulting
  • Expects revenue growth to return to pre-Covid trajectory in second half of FY21
  • Sees limited read-through from results for Indian companies
  • Current valuations for Indian IT companies largely capture improving demand environment
  • Uncertainties around U.S. elections, healthcare crisis and slowing global growth may keep optimism in check and weigh on stocks
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