IT cos to report muted growth in Jan-Mar, FY13 outlook key
Infosys will kick-off IT sector earnings this week. There has been a lot of uncertainty and speculation over the actual business environment for outsourcing companies, as Cognizant Technologies gave a weak guidance, even as Accenture reported strong order bookings.
April 11, 2012 / 10:50 IST
Moneycontrol Bureau
Infosys will kick-off IT sector earnings this week. There has been a lot of uncertainty and speculation over the actual business environment for outsourcing companies, as Cognizant Technologies gave a weak guidance, even as Accenture reported strong order bookings. So the street will be keen to hear what the Bangalore-based technology bellwether announces on Friday morning. January-March is typically a soft quarter for software service providers. Most analysts expect sequential growth in US dollar revenue will be just about 1-3.3% across tier I companies in the quarter."We estimate 1-2% quarter-on-quarter reported US dollar revenue growth for the top 3 players. Volume growth will be weak at 1-3% from slow ramp ups/seasonality; we see flat to lower realization from marginal cross-currency tailwinds (30-50bps)," said Pankaj Kapoor and Apoorva Oza of Standard Chartered.Indian IT companies had got a boost from the sharp rupee depreciation in the third quarter. In Jan-March, the rupee appreciated 1%, while other currencies like pound and euro depreciated by about 1%.Shradha Agrawal and Deepan Kapadia of B&K Securities expect the rupee appreciation against the dollar and continued hiring despite muted volume growth will impact companies' margins by up to 200 bps sequentially.Analysts expect Infosys will beat its 0-0.2% guidance and report a 1% USD revenue uptick in the fourth quarter. However, in rupee terms revenue could decline 1-2% as rupee averaged at Rs 50.2 per US dollar, compared with Infosys' earlier forecast of Rs 52."Inter-quarter, the average rupee has appreciated 1.2% against the US dollar and suggests a likely operating margin impact of 30-50 bps for tier-I companies. However, we expect EBITDA margins to decline 46-187 bps for tier-I companies primarily due to a sharp dip in utilization," said Abhishek Shindadkar and Aishwariya KPL of ICICI Direct.Wipro, which has been undergoing a restructuring over the last few quarters, and HCL Technologies are expected to clock the fastest volume growth in the quarter. OutlookThe uncertainties in the macro environment led by the Eurozone debt crisis still weigh high on Indian IT companies.Infosys had warned post the third quarter earnings that the global economy, driven by slower growth in developed markets, coupled with the European crisis, could impact IT industry growth.Analysts say deal momentum is likely to be slower in the first quarter (April-June) of fiscal 2013 too. However, brighter days could be ahead."While concerns persist in Europe, recent positive data points from the US, the largest market for Indian IT exports, augurs well for the sector
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