India?s top tier IT services firms are expected to beat their full year revenue guidance on the back of stabilisation in major customer accounts and strong demand for outsourcing. The March quarter has been the industry?s best quarter this year. The global economy is limping back to normalcy and although pricing continues to be an issue, enterprises, particularly in the US, have started opening up their purses, analysts said.
Top tier IT firms are expected to report a sequential growth of 3.5-5% in revenues in dollar terms, driven by the industry?s bread and butter segment ? BFSI ? as also telecom. In rupee terms, however, the growth is likely to be a tad lower between 1% and 3% because of the currency?s appreciation against a basket of other currencies.
Most experts expect profits to lag revenue growth because of higher staff expenses. Many companies had announced strong headcount additions, have doled out salary hikes and bonuses. Although the impact of higher salary costs can be off set because of favorable effort-mix and improving utilisation, operating profit margins are seen declining by 50bp to 70bp in the March quarter. Profit after tax may not increase beyond 2%.
Going ahead, discretionary spend on technology is seen gaining momentum in the second half of fiscal year 2011. A thaw in spending from Europe, which is lagging behind the US in economic recovery, is widely foreseen. This may propel top tier IT firms to grow 15-18% in dollar terms in FY11.
Leading software services firms such as Tata Consultancy Services, Infosys Technologies and Wipro that manage complex computer networks and maintain technology operations for many of the Fortune 500 companies have revived hiring, signalling improving demand.