Even as Indian companies’ Q3 earnings are going to be started in two weeks, analysts said the Indian IT services companies are likely to post weak financial results for the March 2024 quarter amid unabated headwinds.
Tata Consultancy Services (TCS), India’s largest software services firm, will on April 12 kick-start the earnings season for the fourth quarter ended March 2024. Infosys will declare its Q4 earnings on April 18, while HCL Technologies will release the results on April 26.
Kotak Institutional Equities in its note said Infosys Q4 results are likely to be weak, with a 1.5 per cent sequential revenue decline. Wipro, LTI Mindtree and Tech Mahindra are also expected to report a sequential revenue decline, while HCL Technologies (services) should outperform on growth at 2.9 per cent in constant currency terms.
“TCS and HCL Technologies will outperform on growth at 0.2-1.7 per cent c/c QoQ. USD revenue growth will benefit from modest cross-currency tailwinds of 2-10 bps across larger peers and 5-43 bps at mid-tier companies,” Kotak Institutional Equities said.
According to Emkay Global Financial Services, mid-cap IT companies may outperform the largecaps in the fourth quarter of FY24. “The midcap IT companies are expected to report sequential growth of 1-5 per cent compared to -2 per cent to +2 per cent (dollar growth) for largecaps.”
Kotak Institutional Equities also said reasonable margin is expected to improve at TCS, while the reversal of one-off impact from unprofitable contracts should benefit Tech Mahindra.
Wipro is likely to report a moderate decline in margins, while HCL Tech’s EBIT margin should be impacted by seasonal weakness in the products business. Margins of LTI Mindtree may be impacted by lower utilization and partly offset by lower pass-through revenues QoQ.
On the FY25 outlook, Kotak Institutional Equities said, “Large clients, especially banks, have the ability to spend, but the willingness is not there. We have cut our revenue growth forecasts marginally across our coverage universe. We expect a margin improvement in FY2025E as the full benefits of employee cost realignments bear fruit.”
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