DBT Bureau
Bengaluru, 5 July 2024
After six quarters of tepid growth, Indian IT firms are likely to see a growth revival in the first quarter of the current financial year (FY25), albeit slowly.
According to brokerage firms, the slowdown in revenue growth rate has bottomed out and Indian IT firms are out of downgrade cycles.
“We expect a mixed operating performance for our coverage universe. Amongst large caps, we expect the strongest revenue growth at +2.5% QoQ (in constant currency or cc terms) for Infosys and the weakest at -2% QoQ in cc terms from HCL Tech. In mid-caps, we expect the strongest revenue growth of +5% QoQ in cc terms from Persistent and the weakest from LTTS at -2%. Barring TCS (impacted by salary hikes) and HCL Tech (impacted by seasonal factors), we expect margins to remain stable to improve across our coverage universe,” said brokerage firm, Nomura in a note giving a preview for the June quarter (Q1FY25) results.
Indian IT firms will start reporting their first-quarter results from the second week of July onwards. Market leader, Tata Consultancy Services is scheduled to announce its Q1 earnings on July 11, while Infosys will announce its Q1 on July 18.
Nomura also predicts a gradual improvement in the operating margins of Indian IT firms. This will be driven by the ramp-up of large deals and increased hiring in the second half of FY25. However, it said most of the growth in operating margin FY25F will be bolstered by significant cost-reduction initiatives.
Similarly, another brokerage firm Prabhudas Lilladher said that some improvement in key verticals like BFSI (banking, financial services & insurance) are likely in the first quarter.
“Q1 revenue performance will be biased towards selective verticals or a couple of large deal ramp-ups that have long been deferred, instead of broad-based recovery within the space. The broader enterprise theme to drive cost-takeout and bring productivity continued through Q1 with critical functions being reprioritized over discretionary programmes. However, a few verticals (BFSI, Communications) witnessed some momentum in activities with a slight uptick in discretionary spending,” Prabhudas Lilladher said in a note.
