The first quarter (Q1) results of the current financial year are likely to reflect a range of negative factors affecting India's $150-billion IT software services sector, triggering a further fall in the share prices of IT stocks next month. Most of the IT stocks have dropped over a three-month period while the benchmark index Sensex has gained about 1,500 points.
Tata Consultancy Services (TCS) will be declaring its Q1 results on July 13, others such as Infosys and Wipro are yet to announce their schedule.
Industry body Nasscom has projected a lower growth rate of 7-8 percent for 2017-18 in comparison to 8.6 percent actually reported last fiscal and this is expected to be seen in the Q1 results, said Girish Pai, head of research at brokerage Nirmal Bang Institutional Equities in a note.
Margin concerns over an appreciating rupee, rising protectionist stance in the Western world, receding "spending euphoria" by BFSI clients are some of the headwinds that IT companies have to reckon with this fiscal, according to him.
In dollar terms, TCS is expected to post 5.2 percent YoY growth in revenues and Infosys 5.8 percent, while Wipro could report 2.4 percent increase in revenues.
Net profit for TCS is projected to fall 4.2 percent YoY while the drop is likely to be sharp at 13.7 percent for Wipro. Infosys is expected to report 2.6 percent growth, Pai wrote in his note.
In constant currency (CC) terms, TCS and Infosys are likely to see their revenues rise by around 2 percent on a sequential basis, while Wipro's numbers could be flattish.
Since April, the share price of Infosys has fallen from Rs 999 (April 6) to Rs 952 (July 6, 12.30 pm), while TCS has traded in the range of Rs 2,400 to Rs 2,347 during the corresponding period.
Share prices of Wipro are not comparable since the company declared a bonus issue in April and the shares are now trading ex-bonus, at Rs 257. Tech Mahindra has dropped from Rs 446 to 377 while HCL Technologies has traded in a narrow range.
Here are the revenue and profit estimates, according to Nirmal Bang Institutional Equities:
|Company||Rev Q1FY18E ($mn)||YoY Growth/fall||Net Profit Q1FY18E (Rs cr)||YoY Growth/(Fall)|
TCS: Revenues to grow 2% sequentially in constant currency terms.
Infosys: Revenues to grow 2.4% sequentially in constant currency terms.
Wipro: Revenues to remain flat in constant currency terms
HCL Technologies: Revenues to grow 3.6% sequentially in constant currency terms.
Tech Mahindra: Revenues to grow 3% sequentially in constant currency terms.
Mindtree: Revenues to grow 3.9% sequentially in constant currency terms.