Double-digit revenue growth expected, pressure on margins may continue

Previous deals, cloud migrations and digital technologies could drive India’s IT sector revenue growth in the July-September quarter, analysts say, but supply-side challenges and pressures on costs could weigh on margins.

Top five Indian information technology companies by market capitalization – Tata Consultancy Services Ltd., Infosys Ltd., Wipro Ltd., HCL Technologies Ltd. and Tech Mahindra Ltd. — are expected to post double-digit revenue growth in the second quarter, according to a Bloomberg survey.

TCS, Infosys and HCL Technologies could see their quarterly net profit increase by 5-12%, while Wipro and Tech Mahindra could experience declines, according to the survey.

“We expect strong sequential revenue growth of 2.5-4.7% for the major players for the September 2022 quarter,” according to Kotak Institutional Equities. However, the EBIT margin is expected to remain under pressure as companies face supply-side challenges and high costs, he said.

According to Nomura, Indian IT commentary will likely become more cautious in the second quarter, compared to the first quarter, in light of higher risks stemming from deteriorating macroeconomic conditions, particularly in Europe.

According to Bloomberg consensus estimates, in the second quarter, TCS could see constant currency growth of 14.27% year-over-year. Wipro’s IT services constant currency growth is expected to be 13.26% year-over-year.

HCL Technologies will most likely experience constant currency growth of 3.11% on a quarterly basis, according to Bloomberg.

Sallie R. Loera