Top-tier IT companies in India are expected to beat revenue projections in dollar terms for the third quarter of the current fiscal, an FE inspection of various brokerage reports has revealed.
EBIDTA margins are expected to bleed owing to increased wages, rupee appreciation and mounting selling, general and administrative (SG&A) expenses, according to reports from Motilal Oswal, ShareKhan and
Angel Securities. Tier-I companies Infosys Technologies, Wipro and TCS are set to announce financial results for the quarter shortly, and the Street expects the industry to bounce back to better utilisation rates on the back of higher deal-flows and favourable cross currency movements during the period.
According to Motilal Oswal Securities Ltd (MOSL), Wipro Ltd was likely to take a lead in quarterly revenue growth during the period, followed by TCS and Infosys. ?We expect Wipro to post the best results in Q3 of FY10, with a dollar revenue growth of 5% quarter-on-quarter, ahead of its guided range of 2.5-4.5%. TCS and Infosys Technologies are expected to follow with growth of 3.9% and 3.7% respectively,? MOSL?s head ? research, Rajat Rajgarhia said in his ?India Strategy Report?.
Sharekhan estimates that Infosys Technologies would report dollar term revenues of $1,194 million, with a sequential growth of 3.4% and ahead of its guided $ 1,155 million to $ 1, 165 million revenues for the quarter. Wipro?s IT services revenues for Q3 are expected to be at $1, 115 million, up 4.6% sequentially and ahead of its projections of $1, 092 million – $1, 113 million.
?Despite lower number of working days during the quarter, we expect IT majors to post a healthy volume growth due to higher business integration and transformation work coming from mergers and acquisitions,? Sharekhan said in its IT earnings? preview for Q3. ?For Infosys, HCL Technologies and TCS, we see the benefits of higher utilisation and positive cross-currency movement largely offset by the appreciation in the rupee against the dollar in Q3FY2010,? the preview report said.
During Q3, the rupee registered an average appreciation of 3.6% against the dollar. Cross currency movements were expected to have favoured dollar term revenues of companies by 0.4-0.8%. Bottomlines for Infosys, Wipro, TCS and HCL Technologies are likely to decline 4.1% sequentially and 1.4% y-o-y, owing to EBIDTA margin pressure in Q3, according to Angel Securities. Infosys and TCS would see a 4.4% and 5.5% sequential decline in profits, while Wipro and HCL would record 2.3% and 1.8% fall in quarter- to- quarter net profits, respectively.
Analysts say the third quarter of the fiscal saw stronger IT spending by traditional outsourcers. ?The biggest factors in the quarter were a strong return of clientele for the industry continuing from the previous quarter and deferred IT spending decisions being pushed by clients from the backburner. The industry has also seen a decrease in lead time for projects, during the period,? said Partha Iyengar ? vice-president and regional research director India for tech research company Gartner.
Other contributors were buoyed discretionary spending by players in verticals like healthcare and telecom and emergence of new markets.