According to Nomura, while Infosys and TCS would show soft growth, other companies like HCL Technologies, Wipro and Tech Mahindra would show stronger growth during the March quarter
Tata Consultancy Services (TCS) and Infosys, the country’s too two IT companies, are likely to report soft growth while companies like HCL Technologies, Wipro and Tech Mahindra would show stronger growth during the March quarter, says Nomura.
According to Nomura’s report on Indian IT sector, Infosys expects to be at the lower end of its FY14F guidance of 11.5%-12% on US dollar revenue growth, which implies a 0.4% quarter-on-quarter fall in 4QFY14F. Infosys attributes the revenue weakness to: (a) retail and hitech segments; (b) skill mismatches leading to delay in ramp-ups and (c) project cancellations/rampdowns. These factors are likely to continue to impact growth in first half of FY15, Nomura said.
The report said, TCS had indicated that in line with seasonality, 4Q revenue growth will be weaker than 3Q, with the India business continuing to show a decline (though the decline is likely to be lower than the decline in 3Q of 9% quarter-on-quarter in rupee terms). Latin America and Europe are likely to show better than the company average growth and the US is likely to grow in line with the company average.
Talking about HCL Technologies, the report sees a 3% quarter-on-quarter growth. Deal signings have been strong for the company in the last four quarters with cumulative deal TCV (total contract value) of $4 billion.
Nomura said it expects 3% quarter-on-quarter growth at Tech Mahindra on account of: (a) deal signings of US$1 billion over the last three quarters; (b) strong growth at top Clients, other than British Telecom (BT) (c) Comviva typically has a stronger 2H, which should offset the decline from cessation of BT-related restructuring revenue in
4Q.
Wipro has guided for 1.8%-3.6% quarter-on-quarter growth in 4Q and has indicated that it is tracking in line with the guidance. Its growth will be better in FY15F on: (a) the continuation of strong growth momentum in Europe; and (b) macro improvements in the US starting to reflect in better demand, the research note said.
Nomura’s comparison of valuation of India’s top IT companies is given in the table below:
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