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IT firms to post robust Q4 growth

The top-line may be driven by 7-11 per cent growth in volumes, say analysts.

india Updated: Apr 10, 2006 13:31 IST

India's software makers are likely to unveil impressive earnings reports for the January-March quarter on the back of increased outsourcing by their overseas clients and flow of large size services deals.

The appreciation of the rupee against all the other major currencies may however cast a shadow over the sequential growth in revenues of the IT majors, say analysts.

A host of heavyweight companies such as Infosys Technologies, Tata Consultancy Services (TCS), and Wipro will start unveiling their financial results for the January-March quarter in the days ahead.

Bangalore-headquartered Infosys, India's second largest software exporter after TCS, will unveil its quarterly financial report card Friday, followed by Wipro, the third largest, on April 19.

"The expectations of improved earnings expansion are very high this time since the volume growth has been good in the last quarter," said Gaurav Dua, who tracks the IT industry for domestic brokerages firm Sharekhan Ltd.

"While the margins may get slightly affected by the rupee appreciation, the top-line is expected to be impressive because of good volumes on increased IT spending by large US corporations," Dua said.

According to the analyst, the top-line is expected to be driven by the 7-11 per cent growth in the volumes during the January-March quarter.

The average sequential revenues are estimated to grow in the range of 6-10 per cent in the quarter, which is marginally lower than the performance in the previous quarter but higher than the market expectations.

Given the strong offshore outsourcing trend and the flow of large deals, Infosys is expected to announce an annual guidance of 24-25 per cent growth in its revenues and a 20-22 per cent growth in its earnings, said Dua.

In the quarter ended March 31, the profitability of export-oriented IT companies is likely to get dented by 50-75 basis points on the back of a 2.2 per cent appreciation of the rupee against the US dollar during the quarter.

Experts say the unveiling of the quarterly financial numbers is all set to be spiced up with the generous dividend and bonus payouts by IT biggies like Infosys Technologies and Wipro.

Nasdaq-listed Infosys, which is celebrating its silver jubilee year, said last week it would consider a bonus issue when it announces the January-March quarterly financial numbers Friday.

Talk of a bonus issue, which will be the ninth since Infosys started operations 25 years ago, propelled the company shares over one per cent on Friday. The stock hasn't moved up much in the January-March quarter in a sizzling stock market.

"The market is buzzing with the talk of Infosys' bonus issue and dividend payouts by other IT companies on the back of strong earnings growth," said Deepak Shah, an analyst with Pranav Securities.

"The overall market momentum in the short to medium term will be greatly influenced by the financial report cards of software majors. Investors are taking a positive view of the tech stocks," he added.

The stock market barometer, the 30-share Bombay Stock Exchange sensitive index or Sensex, rose 2.74 per cent last week.

The key market index touched an all-time high of 11,355.83 in the intra-day trade Friday on sustained institutional buying interest in shares of heavyweight new as well as old economy companies.

Massive investments inflows in Asia's second fastest growing economy after neighbouring China on hopes of sustained higher economic growth and corporate earnings is helping the key index to scale new peaks almost on a regular basis.