India's top 5 IT firms stare at historic revenue mark

India's tier-I IT services companies are set to breach a historic landmark in this quarter -- crossing Rs 1 lakh crore of quarterly revenues. Even a mere increase of 0.2% sequentially in their revenues during the quarter will take them past the milestone.

In June quarter, the combined top line of the top five IT services companies -- TCS, Infosys, HCL, Wipro and Tech Mahindra -- stood at Rs 99,800 crore, just Rs 200 crore shy of the Rs 1 lakh crore mark.  

If street estimates are to be believed the top 5 are expected to clock a cumulative revenue of Rs 1.03 lakh crore -- an annual growth 8.2% from Rs 95,500 crore in the quarter ended September 2018. It is also 3.5% growth on a sequential basis.

Among the top 5, IT companies Noida-based HCL Technologies, which is likely to benefit from the integration of the high-margin IP business, is expected to be the best performer with most analysts pegging it to show a high double-digit growth between 17%-19%. The homegrown company, in the last financial year, had pipped past Wipro as the third largest IT services company.

On the other hand, Bengaluru-based IT major Infosys, benefitting from the inorganic contribution is also likely to get close to clocking double-digit growth in the quarter. The company is expected to see a year-on-year (Y-on-Y) jump of 9%-11%. The brokerage firm Motilal Oswal has forecast that Stater NV, which was integrated in the previous quarter by Infosys, is expected to contribute $48 million to the top line (incremental revenue of $30 million).

The IT companies are also likely to witness far better results than most of the sectors in India.  The main rationale behind the healthy growth in ITeS revenues is that all tier I companies have most of their revenues coming from the US markets. In that case, while the rupee depreciation helps the toplines, on the other hand, the domestic consumption slump is less likely to impact them.

However, most brokerages expect softer performance on the banking, financial services and insurance (BFSI) vertical owing to global headwinds. This is likely to hit IT behemoths TCS and Bengaluru-based Wipro the most -- both companies have a high dependence on the BFSI vertical.

TCS is likely to be growing around 5%-7%, while Wipro is likely to grow between 3%-4%.

However, when it comes to the bottom line, the net profit of the top 5 is likely to be around Rs 17,800 crore. On an annual basis, only TCS may scrap through with an increase in net profits, while all the others might see a decline in the bottom line. On a sequential basis, only Infosys, with a predicted jump of 3%-4% in its PAT, is likely to see its net grow.

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