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Top IT firms like TCS, Infosys and Wipro likely to post worst Q4 results since 2010

Posted by On April 03, 2015 0 Comment

BENGALURU | NEW DELHI: India’s top technology firms are expected to post their worst fourth-quarter results since 2010, hurt by currency volatility that some analysts warned could hinder growth in the coming quarters and dampen discretionary spending by clients.

Several analysts said cross currency volatility will hit sequential revenue growth and profit margins of top IT firms in reported currency, adding to the seasonal weakness associated with the final fiscal quarter. On average, re revenue growth is forecast to be lower by 2-3 percentage points over the preceding December quarter.

Tata Consultancy ServicesBSE -0.14 %, InfosysBSE -2.00 % and WiproBSE 0.56 % are already under pressure to regain growth momentum by funneling efforts into emerging growth areas such as automation, cloud and big data.

IT firms are also risking margins for growth as they lower prices to retain a number of top-tier contracts that are up for renewal this year. Data put together by ET highlight the impact of cross-currency headwinds that are likely to erode profitability and margins for top companies.

In rupee terms, TCS, the country’s largest software exporter, is expected to post sequential revenue growth of 0.2 per cent , Wipro 0.5 per cent , and Infosys less than 1 per cent for the March quarter, according to brokerage India Infoline, or IIFL. US-based Cognizant has forecast sequential revenue growth of about 5 per cent, factoring in the TriZetto acquisition. HCL Tech on Wednesday warned its March-quarter revenue growth would be weighed by the stronger dollar.

TCS, flagging a decline in growth in its energy business due to the fall in oil prices, last month said it expected to report fourth-quarter revenue in line with a year ago, thus falling short of its own forecast of topping last year’s growth.

“Rupee appreciation should decrease addressable opportunity, unless vendors trade off margins,” Kotak Institutional Equities said in a report. “New contracts at prevailing EUR/USD rates would increase the cost of IT for European clients. While clients may adjust to higher IT costs for existing operations, they may cut some ‘nice-to-have’ / discretionary projects

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Source:Economictimes

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