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Last Updated : Apr 11, 2016 04:59 PM IST | Source: CNBC-TV18

Infy to grow by over 2%; 30-60 bps margin expansion for IT: IIFL

Expectation from Infosys is reasonable owing to large deal wins over the last nine months, says Sandeep Muthangi, IT Analyst, IIFL-Institutional Equities.

Fourth quarter is a jinxed quarter for Infosys, says Sandeep Muthangi, IT Analyst, IIFL-Institutional Equities.

The company's guidance implies an over 2 percent growth for the quarter, says Muthangi.

Muthangi adds that expectation from Infosys is reasonable owing to large deal wins over the last nine months.

Discretionary spending didn't seem to have a larger role to play for the company in this quarter, says Muthangi.

He also hopes for a
30-60 basis point margin expansion for the sector in this quarter and 60 bps improvement for Tata Consultancy Services in Q4.

Below is the verbatim transcript of Sandeep Muthangi's interview with Ekta Batra & Anuj Singhal on CNBC-TV18.

Anuj: How are you looking at the IT sector overall and Infosys in particular?

A: This quarter is a bit of a jinx quarter for Infosys. It has been disappointing especially in Q4 for the past couple of years. This time it will be different. Expectations are reasonable. The guidance implies 2 percent plus growth for the quarter, so they should do about that much. One of the differences this year, this the thing that we get asked the most is what has changed in Infosys and what gives people confidence that they will do well this quarter, one of the things that has changed in Infosys in their large deal wins; if you look at the nine month large deal announced total contract value (TCB) of Infosys is up about 34 percent.

In this quarter where discretionary spending doesn't have a larger role to play, this is the base that you are relying on to give that growth, so they should do about 2 percent. Margins in general for the sector should be a bit better this quarter, rupee has depreciated a bit, last quarter you had one-off impact of Chennai - that should not be there, so we think margins won't decline further for Infosys in this quarter.

Ekta: For the sector as a whole, how much margin improvement do you expect because the Chennai flood impact won't be there?

A: Some companies did not have too much of an impact, even Chennai last quarter, some companies had. In general I would look at 30-60 bps expansion of margins for most companies. Tech Mahindra would have salary hikes and other issues, so I do not think their margins will expand but in general I am looking at 30-60 bps margin improvement in the quarter.

Anuj: What about Tata Consultancy Services (TCS)?

A: Tata Consultancy Services managed margins well over the past couple of years, so their margin should improve in the quarter. I am at 60 bps improvement for TCS for the quarter.
First Published on Apr 11, 2016 12:30 pm
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