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  1. Muted Q3 revenue growth for Indian IT companies, visa issues a concern, say analysts

Muted Q3 revenue growth for Indian IT companies, visa issues a concern, say analysts

Top Indian IT firms are expected to report muted financial performance for three months ended December due to a lesser number of working days in the quarter and softness in banking and financial services (BFS) segment, say analysts.

By: | New Delhi | Published: January 7, 2018 11:31 AM
IT companies, IT firms, indian it industry, information technology, financial services, tata consultancy, TCS, infosys, wipro To address the growing protectionist sentiments (and measures that may follow), Indian IT firms have aggressively ramped up local hiring in the US, even though such a move impacts their margins. (Reuters)

Top Indian IT firms are expected to report muted financial performance for three months ended December due to a lesser number of working days in the quarter and softness in banking and financial services (BFS) segment, say analysts. Investors will also keenly await commentary on the demand outlook by the management of IT services majors like Tata Consultancy Services (TCS) and Infosys, even as implications of the US tax reform and proposed changes to visa rules remain a concern. TCS will kick-off the third quarter earnings announcement season on January 11, followed by Infosys a day later. Wipro is slated to announce its numbers on January 19. “We estimate 1-1.8 per cent organic constant currency revenue growth for tier-I Indian IT… We expect muted revenue growth for tier-I players due to the usual end-of-the-year furloughs and continued softness in BFS and North America,” Kotak Institutional Equities said in a report. Mid-tier companies are expected to report higher growth, powered by a ramp-up in deals won, it added. According to Motilal Oswal, key events that investors will keep a watch on include comments on IT budgets for 2018, preparedness to tackle visa-related challenges and views on key sectors like BFS.

Besides, investors and market watchers will wait to hear from Infosys’ new CEO Salil Parekh on his strategy to spur growth for the company that is trying to put behind the almost year-long public standoff between its high-profile promoters and the past leadership. Kotak said the imposition of ‘Base Erosion and Anti-abuse Tax (BEAT)’ on payments made by the US companies to its foreign affiliates will impact select Indian IT companies, more than offsetting gains from the lower corporate tax rate in the US. Recent reports of the US mulling steps to make H-1B visa processes more stringent and increasing cost of the work permits has added to the woes of over USD 150-billion Indian IT industry as it is heavily dependent on exports.

The US accounts for over 60 per cent of the sector’s export revenues with BFS as one of the major verticals. To address the growing protectionist sentiments (and measures that may follow), Indian IT firms have aggressively ramped up local hiring in the US, even though such a move impacts their margins.

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