Grim quarter, IT revenues seen to rise by just 2 to 5 percent

With Infosys kicking off the earnings season on Friday, analysts believe that a 2% to 5% growth in revenue (in dollar terms) is likely in the July-September quarter of this year when IT majors report earnings. The September quarter is usually the strongest quarter for IT firms, but analysts see this year as slightly weaker.

"For large caps, we expect a revenue growth of 2% to 4% while for the mid tier firms, it is likely to be in the range 2% to 5%. For Infosys, we have revised revenue guidance to 1%-2%," said Shashi Bhushan, senior research analyst at Prabhudas Lilladher, a brokerage firm.
While TCS, HCL Tech and Infosys don't provide quarterly guidance, Cognizant has given a guidance of 4.4% quarterly growth and Wipro has guided to a growth of 0.3% to 2.3%.NASSCOM expects Indian tech companies to grow revenues by 11% to 14%.

Brokerage firm Angel Broking expects TCS and HCL Tech to perform above industry average while it expects Infosys to grow in the mid single digits. It also says that given the current uncertainty, unfavourable cross currency environment and "broadly soft" first quarter results, Nasscom's growth guidance seems to be on the optimistic side. It added that if challenges continue to prevail in the Banking, Financial Services and Insurance (BFSI) industry, which is the largest revenue generator for IT companies, then the growth trajectory of Indian IT companies will be shaken up.

Edelweiss Securities said that it is "a tad sceptical of Wipro's growth" and believes that the company will underperform for at least one more quarter. Predicting 1%-4% revenue growth for the top 4 companies, it said that "TCS and HCL Tech will lead the pack with around 4% growth and Infosys' growth may come a tad closer to around 3%. We expect margins to decline slightly for Wipro and HCL Tech led by wage hike impact, and marginally for TCS due to investments in new initiatives. Infosys is likely to maintain its full year guidance of 5%."

The firm expects the profit after tax for the IT industry as a whole to fall by 3.9% compared to the previous quarter.

Analysts at IDFC Securities expect Infosys, TCS and HCL Tech to report a revenue growth of 3%-5% QoQ (in dollar terms) while expecting Wipro to lag the Tier 1 service providers with a revenue growth of about 2% QoQ.

Dipen Shah, Head- Private Client Group Research at Kotak Securities, said, "We expect companies under our coverage to report a sequential revenue growth of about 4%, driven by volumes and the depreciation in the rupee.

Volumes for the top-4 companies are expected to rise by 2% - 4%. This will be relatively muted for a quarter, which is considered to be the best for Indian IT companies (July-September period)." He added that slower growth in discretionary spends and continued delays in spending decisions have likely continued to impede revenue growth.