Double-Digit Revenue Growth Expected, Margin Pressure May Sustain

Previous deal wins, cloud migrations and digital technologies could drive revenue growth for the Indian IT sector in the July-September quarter, but supply-side challenges and cost pressures may weigh on margins, according to analysts.

India’s top five information technology companies by market capitalisation—Tata Consultancy Services Ltd., Infosys Ltd., Wipro Ltd., HCL Technologies Ltd. and Tech Mahindra Ltd.—are expected to report double-digit revenue growth in the second quarter, according to a survey by Bloomberg.

TCS, Infosys and HCL Technologies could see quarterly net profit rising between 5-12%, whereas Wipro and Tech Mahindra may see a decline, the survey indicated.

“We forecast a solid 2.5-4.7% sequential revenue growth for large players for the September 2022 quarter,” according to Kotak Institutional Equities. However, the EBIT margin should remain under pressure as companies deal with supply-side challenges and elevated costs, it said.

According to Nomura, the Indian IT commentary will likely turn more cautious in the second quarter, as compared to the first quarter, in light of higher risks emerging from the worsening macroeconomic situation—particularly in Europe.

According to the Bloomberg consensus estimates, in the second quarter, TCS may see a year-on-year constant currency growth of 14.27%. Wipro IT services’ constant currency growth is likely to be 13.26% year-on-year.

HCL Technologies will most likely see a constant currency growth of 3.11% on a quarter-on-quarter basis, according to Bloomberg.