Battle for 3rd slot in IT space hots up

As we enter the third week of IT results for the second quarter, India's third and fourth largest IT services companies will announce their numbers this week.

India's third largest IT services company (in terms of revenues) Wipro is announcing their results on Wednesday, while the fourth largest firm HCL will declare their numbers on Tuesday. Incidentally, HCL has already overtaken Wipro in terms of net profit to become the third largest player during the first quarter this year.

In terms of revenues too, HCL is likely to jump to the third slot as the gap has narrowed considerably in the previous quarter.

According to analyst predictions, HCL is set to see a double digit growth in its revenues, while for Wipro the growth is likely to be in single digit. In rupee terms, HCL's second quarter revenue is pegged at Rs 14,672.4 crore and Wipro's revenues are pegged at Rs 14,605.2 crore, as per the analysis of Motilal Oswal.

In dollar terms, HCL has already taken over the third slot from Wipro during the first quarter of 2018-19, when it clocked revenues worth $2,054.5 million, ahead of Wipro's $2,042 million, albeit a slender lead.

In the first quarter of current financial year, Wipro's revenues stood at Rs 13,977.7 crore, while HCL's revenues stood at Rs 13,878 crore.

The revenue growth at HCL is primarily driven by strength in the segments of people and services, and integrated facilities management.

However, for Wipro, according to analysts, its revenue mix is not yielding expected growth. "Wipro is over dependent on the US geography for revenues, where the growth is muted currently. Also, in BFSI space, Wipro doesn't have much to offer like its larger peers TCS and Infosys. That is why they are under-performing," a senior analyst covering the sector told DH.

Wipro generates close to 30% of its revenues from the Banking, Financial Services and Insurance (BFSI) market.

In dollar terms, Wipro's revenues are expected to remain flat, with a year-on-year growth of less than 1% according to Motilal Oswal. For HCL, the revenue growth in dollar terms is expected to be in excess of 8%.

"For Wipro and HCL, organic growth is expected to linger in the low-to-mid single-digit range," Motilal Oswal said in its pre-earnings report.

In terms of net profit, most advisories predict the net profit growth at HCL to be in excess of 20%, while for Wipro the numbers are expected to be flat in the range of 2-7%.

According to analysis of Motilal Oswal, after taking over third slot from Wipro in first quarter in terms of net profit, HCL is expected to widen the gap in the second quarter. The net profit of Wipro for the quarter is expected at Rs 2,221.6 crore, substantially lower than HCL's expected Rs 2,722 crore.

In the quarter ended June 30, 2018, Wipro had clocked a net profit Rs 2093.6 crore, while HCL had clocked Rs 2,403 crore.