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Software service cos may post muted growth: Experts

Market experts expect companies to report a sequential revenue growth of about 4%

Written by Agencies | New Delhi | Published: October 7, 2012 12:57:55 pm

The July-September quarter,which is traditionally a strong one for software service companies,may be muted on slower growth in discretionary spends and continued delays in spending decisions,analysts have said.

Market experts expect companies to report a sequential revenue growth of about 4 per cent,driven by volumes and the depreciation in rupee.

“This will be relatively muted for a quarter,which is considered to be the best for the Indian IT companies (July-September period).

“Slower growth in discretionary spends and continued delays in spending decisions have likely continued to impede revenue growth,we believe,” Kotak Securities Head (Private Client Group Research) Dipen Shah said.

The cross-currency volatility impact is expected to be smaller,though negative,for the quarter,he added.

Infosys will kick-off the earnings season with its results announcement on October 12. While TCS and Wipro are yet to announce their dates for quarterly results,HCL Technologies will make their numbers public on October 17.

The rupee depreciated sharply to the US dollar in the April-June quarter,but it has appreciated in the July- September quarter. Also,the full impact of salary hikes given

by several companies in the previous quarter will be seen in the July-September quarter.

“Revenue growth would be largely volume-driven with positive impact of cross currency movement…margin tailwinds from fresher hiring and absence of US visa costs to be partly offset by wage hike and investments,” IDFC Securities said in

its Q2 Earnings Preview.

TCS is expected to lead the Tier-I pack with 4.3 per cent quarter-on-quarter dollar revenue growth,while Infosys is also likely to see a good quarter with 4.1 per cent

quarter-on-quarter revenue growth,Kotak Institutional Equities said in its quarterly technology report.

Wipro will likely report a weak quarter and Tier-II companies are likely to under-perform Tier-I IT players,it added.

“Infosys has stopped giving quarterly guidance. We expect the company to increase the annual revenue guidance marginally,because of the Lodestone acquisition. However,with continuing uncertainty on pending decisions (largely discretionary spends),the company may remain conservative while giving the annual organic growth guidance,” Shah said.

Quarterly variations in some companies will also likely impact the overall picture,he added.

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