All eyes are on India Inc's December quarter results this week, with the IT giant Tata Consultancy Services (TCS) set to unveil its report card on January 9. And it’s not just TCS—the IT sector has a full week ahead with other big players ready to reveal their Q3 numbers.
While Q3 might feel a bit sluggish due to seasonal furloughs, there’s light at the end of the tunnel. Easing macro uncertainties and a more optimistic outlook for tech spending are expected to boost the sector this year. After a quiet first half of FY25, analysts are hopeful that discretionary spending will pick up, tech job postings will rise, and tech layoffs will continue to slow, all of which could help lift BFSI revenue.
HDFC Securities analysts believe HCL Technologies will lead the pack in both growth and margin improvement within the tier-1 IT space. Meanwhile, mid-tier players like Persistent Systems and L&T Tech are expected to show strong sequential growth.
“Tier-1 IT revenue growth will range from +5 percent to -1 percent YoY, while mid-tier IT companies will see a wider range of +20 percent to -1 percent YoY growth,” they said, adding that mid-tier firms are likely to outshine their larger counterparts.
When it comes to margins, expect a mixed bag. For companies that have implemented wage hikes—like Wipro, LTIMindtree, and BirlaSoft—margins are likely to dip. For tier-1 companies, margins could fluctuate between a drop of 140 bps and a rise of 100 bps, while mid-caps could see variations of -160 bps to 60 bps QoQ, according to Emkay Global Financial Services.
But here’s the catch: the true catalyst for the sector will likely come after Q3FY25, once client budgets for CY25 are finalised and we get a clearer picture of how client behavior is evolving.
Jubilant FoodWorks (Rs 765 | +1%)
Strong Q3 business update, shows 56% YoY revenue growth
Bull case: The company’s robust 56 percent YoY revenue growth, driven by strong demand for Domino's India and successful expansion, positions it for continued growth. The strategic acquisition of DP Eurasia and impressive like-for-like growth of 12.5 percent in Q3FY25, along with an expanding store network, indicates strong long-term prospects and market share gains.
Bear case: Despite solid growth, the company's reliance on continuous store expansion and acquisitions could face challenges in the form of rising costs or market saturation. Any slowdowns in consumer spending or delays in store openings may dampen the expected future growth and pressure margins, particularly in a competitive QSR industry.
Dabur (Rs 504, -4%)
Shared Q3 business update, which hinted towards flattish profitability growth.
Bull Case: Rural consumption in the FMCG sector showed resilience, continuing to grow at a faster pace than urban areas. Alternative channels like modern trade, e-commerce, and quick commerce continued to deliver strong growth.
Bear Case: Domestic volumes are likely to be flat YoY due to pressure in the general trade segment. A late and mild winter has affected the home and personal care segment. Additionally, Dabur’s juice business is facing tough competition from the rising presence of Campa Cola. The management expects consolidated revenue to grow in low single digits.
(with input from Zoya)
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
