IT companies expect 0.5-3 percent quarter on quarter (q-o-q) cross currency (c/c) revenue growth for tier-I.
As per the sector’s (IT) forecast ,cross currency headwind of 50-100 bps for tier-1 IT due to depreciation of GBP (Great Britain Pound) will partly offset by appreciation of JPY(Japanese yen), AUD (Australian Dollar )and EUR (Euro) against USD (United States dollar).
The forecast further says Infosys would lead the pack with c/c growth of 3% followed by HCL Technologies (HCLT) (2.6%) and Tata Consultancy Services(TCS) (2.4%) and Wipro (0.5%). Growth will be impacted by broad based weakness in BFSI, weak healthcare and delays in projects.
Slowdown in growth rate and strong rupee will lead to toning down of margin expectations by companies. Infosys will likely guide for margins at the lower-end of the band of 24-26% and TCS will guide for FY 2017 EBIT margin below the 26-28% range.
IT sector expects 40-50 bps improvement in margins of Infosys and TCS. HCLT and Wipro’s margins will decline 100-120 bps largely due partial impact of wage hike over and above cross currency headwinds.
Tech Mahindra’s margins will decline marginally due to one-off restructuring costs associated with largely onsite-centric employee separations.
If the company continues with its historical approach, the guidance will be cut to 9-10% range from 10.5-12%. However the cut could be higher if the company wants to build in additional cushion in numbers.