India's top IT firms Tata Consultancy Services (TCS) and Infosys are expected to announce strong revenue growth for April-June quarter, after posting disappointing results in the March quarter.
Many brokerages believe that seasonal demand and receding currency fluctuations have helped IT companies in the first quarter of the current fiscal year.
Even though some software firms such as Tech Mahindra, Persistent Systems and KPIT Technologies have warned about posting weak earnings in April-June period, some analyst expect top line firms to post an improved growth figures in the quarter, partly supported by increase in technology budgets of their clients.
"Seasonally weak mobility business will be a drag on Q1 revenues and EBITDA. H1 B visa costs will be another drag on margins," Tech Mahindra had said on 29 June.
Tech Mahindra's profit fell nearly 40% to ₹472 crore in January-March quarter, due to lower margin and increase in forex losses.
However, India's largest software firm TCS is expected to post a growth of about 4% in its revenues in the June quarter on sequential basis, while the second biggest company Infosys is also estimated to put up a good show.
Country's third largest IT firm Wipro has already cautioned about a slow beginning to the year. Analysts said that the company would find it difficult to "regain momentum" in the next quarters of FY16.
ICICI Securities forecasts the income of the top five domestic IT companies to witness a sequential growth of 2.6% in April-June quarter in dollar terms.
"Excluding Tech Mahindra, we expect the revenue growth to be 3 per cent Q-o-Q and 7 per cent Y-o-Y. This is broadly in line with the Qo-Q growth of 2.8 per cent and 3.4 per cent for the top four vendors in Q1 of FY14 and FY15, respectively," Kuldeep Koul, an analyst at ICICI Securities, told The Economic Times.
Infosys and HCL Technologies are projected to record an average sequential revenue growth of about 3% in the first quarter. Wipro estimated its revenue to grow in a range of -0.5% and +1%.
While software company Accenture's upbeat revenue guidance of 9 to 10% for the full year has lifted investors' confidence in Indian IT companies, some analysts warn that its robust growth may not necessarily benefit domestic IT services firms.
"The usual buzz of the June quarter is definitely missing this time — I don't think we should expect any blockbuster numbers, given that there haven't been too many large deal signings over the last few quarters, and also clients in general have been tight with budgets," said an India-based analyst at a top multinational brokerage.
In March quarter, revenue growth of top IT companies hit its worst levels in five years, mainly impacted by cross-currency fluctuations. However, the companies expect the currency impact to be less in the June quarter, as rupee saw a depreciation of about 2.2% against the dollar in the period.