IT cos set to report robust Q4 results
Expected to project double-digit growth in revenues for FY22, say experts
Bengaluru: As Indian IT services companies are all set to announce their fourth-quarter results starting next week, analysts are projecting a strong show for most IT biggies. On the back of strong demand, these companies are also expected to project double-digit growth in revenues for FY22.
"We expect IT companies to report healthy Q4 revenues. We believe improved traction in BFSI (banking, financial services & insurance), retail, manufacturing, hi-tech and life science will drive revenues in the quarter. This, coupled with a cross-currency tailwind (rupee has depreciated against dollar), will further boost revenue growth in the quarter," Devang Bhatt, an analyst with ICICI Securities wrote in a research note.
Among tier-1 companies, Tata Consultancy Services and Infosys are expected to see dollar revenue growth of 5 and 5.3 per cent respectively. Similarly, HCL Technologies and Wipro are expected to witness dollar revenue growth of 4 and 3.9 per cent during this quarter, ICICI Securities said.
TCS will announce its results on April 12, while Infosys will provide its Q4 earnings on April 14, followed by Wipro on April 15. On the back of strong demand from global enterprises, Indian IT services firms are also expected to give strong revenue guidance for FY22. "We expect Infosys and HCL Technologies to provide double-digit revenue growth guidance of 12-15 per cent and 11- 13 per cent YoY (in constant currency terms) respectively," Brokerage firm Emkay wrote in a note. For another IT major Wipro, the brokerage firm said that the company would reap the benefits of the simplified operating model, geographical expansion and deal ramp-ups. "Wipro is expected to guide for 1-3 per cent revenue growth for Q1 of FY22," the brokerage firm said.
During the fourth quarter ended March 2021, deal momentum for tier-I companies remained strong. While market leader TCS clinched new deals from Vodafone, ThreeUK and Skanska; Infosys bagged outsourcing contracts from Siemens, Toyota, Newmont, and Google.
Similarly, HCL Technologies bagged contracts from Airbus and Tenneco; the fourth largest IT firm Wipro clinched outsourcing contracts from Capco, Ampion, Telefonica and Estee Lauder among others. Analysts said that the deal pipeline for most Indian IT biggies would remain strong. While revenue growth and deal pipeline are expected to be strong, operating margins improvement will not be much due to wage hikes rolled out in past quarters.
"Margins are likely to take a hit sequentially on account of salary hikes, promotions, bonuses and strong rupee. EBIT margin may expand on a YoY basis for most of the companies, driven by low travel costs, tight cost control and operating efficiencies," Emkay wrote in a note. While TCS announced a wage hike of 6-8 per cent in March, Infosys had rolled out 100 per cent variable pay, salary increments, and promotion in January this year. The third-largest IT firm HCL Technologies has announced a bonus of Rs 700 crore in February and Wipro had rolled out wage hikes for junior employees. "We expect Infosys and HCL Technologies to defend their FY21 margins and expect them to guide for FY22 margins in the range of 22-24 per cent and 20-21 per cent respectively," the brokerage firm said.