NEW DELHI: Domestic IT firms are likely to post up to 2 per cent sequential growth in December quarter revenue in constant currency (CC) terms for the seasonally weakest period of the year.
Growth in verticals like retail and BFSI may remain tepid, but the companies many report a healthy rise in deal wins.Management commentaries for Calendar 2020 and fourth quarter of FY20 will be watched keenly, analysts said.
Brokerage Kotak Securities expects IT biggies to log a constant currency revenue growth of 0.7-2 per cent sequentially and 2.3-15 per cent on a year-on-year basis.Nirmal Bang Institutional Equities projects flat to 2 per cent sequential growth in revenues (CC terms) for top IT firms, except for Tech Mahindra.
For Tech Mahindra, this brokerage foresees a 6 per cent sequential growth in CC revenues against Kotaks 2 per cent projection.
Nirmal Bang said global macros turned weaker in December quarter, and commentaries from the IT firms are likely to be incrementally more cautious this quarter.We believe the markets focus would be on total contract value (TCV) of large deals and management commentaries about client behaviour going into FY21, especially around conversion of the already won TCV," it said.December quarter is usually a lean period for the technology sector due to furloughs and lower working days.Kotak Securities said TCS revenue growth on a YoY basis is likely to moderate to 6.8 per cent in CC terms due to a slowdown in BFS and retail segment and the high base of the previous year.
Infosys is likely to deliver 9 per cent revenue growth YoY partly driven by acquisitions and other inorganic initiatives, it said.During the quarter, the rupee depreciated against the dollar.
But it may offer only a mild (up to 0.2-0.5 per cent) tailwind to IT firms margins.We expect TCS margin to fall below the 24 per cent level.
Infosys margin is expected to improve sequentially, as some of the large deal transition costs recede.
Tech Mahindra would see a strong pick-up in growth driven by the rampup of the AT-T deal.
Most companies should witness mild cross-currency tailwinds for the quarter on a QoQ basis, Nirmal Bang said.