Cognizant likely to trump Wipro in June quarter

Cognizant Technology Solutions may finally take its much anticipated lead over Wipro in the June quarter in terms of revenues, going by the business outlook provided by the two firms. In the Indian IT services landscape, Cognizant is currently placed fourth after TCS, Infosys and Wipro but turbocharged growth over the last one year fueled by BFSI has seen Cognizant narrow down the revenue differential with the Azim Premji-led firm.

On Tuesday, Cognizant guided for a sequential growth of nearly 6% in the June quarter to $1.45 billion, while Wipro last Wednesday said that it expected revenues in the quarter to be flat ? between $1.39 billion and $1.42 billion. Given the current market trends, analysts expect Cognizant to beat its guidance during the qurater, thereby comfortably going past Wipro. Unless, Wipro pulls up its socks and performs significantly beyond expectations, the firm may not be able to retain its lead, market watchers warned.

?The writing is on the wall. The June quarter will not be a one off aberration. Cognizant is expected to continue its growth momentum at least for the next three quarters,? an analyst who did not want to be quoted said. Wipro, he added, can still manage a slender lead for full year FY 12 if the firm manages to capitalise on the demand enviornment in the second half of the year.

Cognizant expects to grow 29% in fiscal 2011 to least $5.925 billion. Wipro does not give full year guidance but some analysts see the firm growing 20% in FY 12.

Sanjeev Hota of brokerage firm Sharekhan, however, said there is room for further guidance improvement from Cognizant. ?We expect the firm to grow 2-3% more for the full year while we expect Wipro to grow 20% in FY12,? he said. A 20% growth would take Wipro to $6.2 billion in FY 12. If Cognizant grows 31%, the two firms would be close, even at the end of the year.

Another equity analyst who did not want to be identified said Cognizant can take advantage of the ongoing restructuring at Infosys and Wipro that appears to have distracted the top management of these companies. ?The restructuring appears to have slowed them down a bit. However, the demand enviornment is strong and it looks unlikely that top tier Indian IT companies can’t capitalise on it,? he said.