Indian IT to do better in FY14, bet on HCL Tech: Goldman

Moneycontrol Bureau

The Indian IT sector is expected to perform better in FY14 on an estimated forecast growth of 12 percent in USD revenue, according to a report by Goldman Sachs.

Highlighting the findings of the 67th edition of Goldman Sachs' global IT spending survey, analysts Rishi Jhunjhunwala and Girish Ramkumar explain that the growth in the India IT sector will be buttressed by an estimated 3 percent growth in global IT spending growth as compared to 2 percent in 2012 and reduced impact of the fiscal cliff allowing IT budgets to expand during the course of 2013.

However, the analysts add that results for the third quarter of FY13 may be seasonally weak with growth in USD revenue at 2.7 percent quarter-on-quarter, due to impact from seasonal shutdowns in manufacturing, BFSI and one-off disruption from Hurricane Sandy.

The analysts have assigned a 'buy' rating to HCL Tech, citing growth prospects and attractive valuations. "The company seems an attractive bet driven by and 18 percent compounded growth in EPS over FY12-FY15E on strong revenue visibility from deals worth USD2.5 billion in FY12. HCL is currently trading at 11.6 times of the expected price-earning for FY14 and selling at a 17 percent discount as compared to its large-cap peers," the report said.

The report also expects TCS to lead the IT sector with a 3 percent q-o-q growth in USD revenues and Infosys to cut guidance on organic USD growth in FY13 to over 4 percent from over 5 percent.

HCL Technologies closed at Rs 633.85 (up 1.35 percent), Infosys closed at Rs 2,348.30 (up 0.51 percent) and TCS closed at Rs 1,297.50 (up 1.50 percent) at the end of trade on Friday, January 4, on the Bombay Stock Exchange.