The recovery in growth momentum for the Indian IT companies seems to be far away due to the delay in the much-anticipated deregulation and the tax rate reforms in the US.
While most of the top Indian IT companies are expected to show a minimal growth unlike expectations at the beginning of the financial year, the revenues for Wipro are expected to decline by 1.4% on year-on-year (YoY) basis, in its first quarter results. However, the bright spot in the industry seems to be HCL Technologies, whose revenues are expected to go up by 7.7% on YoY basis, and Tech Mahindra with 4% growth, in terms of revenues, according to a report by financial services firm, Motilal Oswal.
The total industry revenues, for Tier-1 IT companies (TCS, Infosys, Wipro, HCL and Tech Mahindra) are expected to grow by 2.1% to Rs 79,600 crore, while the industry profits are slated to decline by the similar percentage to Rs 14,200 crore.
The revenues of country’s largest IT services company, TCS, are expected to grow by a mere 1.4% to Rs 29,700 crore, while its profit is slated to decline by 1.9% to Rs 6,200 crore.
The only two companies that are expected to show growth in net profit are Infosys and HCL, albeit negligible. While the report predicts 0.1% increase in the profits of Infosys to Rs 3,400 crore, the profits of Tech Mahindra are expected to grow by 0.7% to Rs 2,100 crore.
The report predicts a gloomy quarter for Wipro, with 9.5% decline in its profits to Rs 1,900 crore compared with Rs 2,100 crore. “We see growth marred by healthcare vertical prospects at Wipro,” the report says.
If industry insiders are to be believed the growth in Tech Mahindra and HCL has been propelled by higher growth rates in Banking, Financial services and Insurance (BFSI) and manufacturing segments. Tech Mahindra will lead the BFSI growth, while HCL is expected to be leading the growth in revenues from the manufacturing vertical. The growth in Tech Mahindra has been aided by their DAVID (digital, automation, verticalization, innovation and disruption) drive.
The Indian rupee appreciated by 3% against the US dollar during the first quarter. “Despite TCS being the only company this quarter among the top Tier with full wage hike implementation, we notice YoY margins under continued pressure across the board,” the report said. The YoY margins are expected to move in a narrow range (-240 basis points to +20 basis points) across the top tier, with Tech Mahindra faring the worst.
The Indian IT industry is set to announce first quarter financial results next week starting with TCS.