Slower growth in discretionary spending and delays in decision making of clients may continue to hurt Indian IT companies' revenue growth in the December quarter, analysts today said.
Traditionally, the October-December quarter is a weak quarter for IT companies as the number of working days is lesser compared to other quarters due to the holiday season at the client locations.
"Volumes for the top 4 companies are expected to rise by 2-3 per cent. While there is a seasonal impact, slower growth in discretionary spends and continued delays in spending decisions have likely continued to impede revenue growth. Hurricane Sandy also had a marginal negative impact," Kotak Securities IT Analyst Dipen Shah said.
The cross currency volatility impact is expected to be marginally positive but the near 2 per cent quarter-on-quarter appreciation of the rupee on an average will have a negative impact on revenues, he added.
The earnings season will be kicked off by Infosys announcing its numbers for October-December quarter on January 11, followed by Tata Consultancy Services (TCS) on January 14 and HCL Technologies on January 17.
According to Angel Broking's Q3 FY2013 result preview, USD revenue of tier-I IT companies is expected to grow moderately by 2.2-3.2 per cent quarter-on-quarter, with TCS leading the pack. For tier-II IT companies, USD revenue growth is expected to be (1.3)-8.4 per cent quarter on quarter.
After almost a year of volatile currency, the third quarter of FY2013 saw some stability in the currency movement, the analysts said.
"On an average basis, the rupee appreciated by about 1.8 per cent q-o-q, which will negatively impact the rupee revenue growth and can trim down the operating margins of IT players by 50-70 basis points q-o-q," it added.
In rupee terms, revenue growth for tier-I IT companies is expected to be in the range of 1-2.2 per cent q-o-q, while for tier-II IT companies it is expected to be at (2.4)-7.6 per cent q-o-q.
Factors including weakening rupee, high production input prices, hike in borrowing costs, and geo-political situation have plagued the IT industry in 2012.
These, along with domestic policy paralysis, prompted software services industry body Nasscom to lower growth forecast for 2012-13 for IT-BPO exports to 11-14 per cent from previous fiscal's target of 16-18 per cent growth.
Infosys and Hexaware have already lowered their FY'13 guidance on back of customer delays and lower decision making impacting project ramp ups.
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