Q3: Top 5 IT firms may hit 1L cr

The combined quarterly revenues of India's top five IT services firms are likely to touch the Rs 1 lakh crore mark in the third quarter of the current financial year.

If the combined revenue of TCS, Infosys, HCL, Wipro and Tech Mahindra grows by over 4.71% on a sequential basis the top five IT companies will clock a combined quarterly revenue of Rs 1 lakh crore. The top 5, also called as the Tier-I IT services companies had clocked Rs 95,500 crore revenues in the second quarter ended September.

Most analysts covering the sector expect the sequential growth to be between 4-5% during the muted third quarter. The revenue growth of the top 5 IT services companies is expected to range between 3-6% on an individual basis, sequentially.

Exciting battle ahead

The global headwinds impacting India's IT services segment might reignite the fight for the third slot in the sector during the third quarter, as most of the companies are likely to see muted growth in their financials.

Most of the of Tier-I IT services firms are staring at a decline of up to 12% in their net profits on a sequential basis. Most of the advisories expect the combined net profit of the top five IT services firms to decline between 1-2% on the sequential basis to about Rs 17,600 crore in the Q3 of the financial year 2019.

Various factors that might impact the growth of the IT services companies include the trade war escalation between the US and China, a slowdown of US macro and the Brexit ramifications. In fact, IT major Infosys had, in FY 17, had taken a hit of about $50 million as Royal Bank of Scotland (RBS) shelved plans to set up a separate bank in the United Kingdom in the wake of Brexit.

Bengaluru-based Wipro, which has been dislodged from the third place during the second quarter by HCL on the back of constant poor performance, might end up as the best performing IT services company in this quarter. "Wipro is expected to deliver strong profitability, with efficiencies in IT Services business compounded by an improvement in Non-Services segment, which was incurring losses. We expect IT Services EBIT margin to expand 50 bps QoQ to 18.5%," market advisory firm Motilal Oswal said.

On the contrary, the profits of HCL are expected to decline by over 5% on the sequential basis.

On a year-on-year basis, however, all the Tier-I companies, except for Tech Mahindra, are going to see muted growth. Only TCS and Infosys are expected to clock annual profit growth in excess of 5%.