The Hindu Business Line : IT majors may better projections in Q1

MAJOR IT firms are seen reporting good growth for the first quarter of the current fiscal. However, no positive surprises are expected to justify the high growth seen in the share prices of several of these firms over the quarter, analysts said.

Prices of key IT stocks have seen a growth of between 5 per cent and 24 per cent since March 31 despite a modest Q1 revenue projections by these firms.

The earnings season is set to start from next week. Increased volume growth driven by growing offshore momentum coupled with more number of billing days may help the firms post a decent revenue growth of between five and seven per cent, analysts said. Pricing had almost remained flattish during the quarter, they said.

However, increased wage costs due to salary hikes coupled with the appreciation of rupee against dollar, euro and pound were seen impacting the margins negatively. Moreover, the ten-fold hike in H-1 B visa costs could also impact the earnings, analysts said.

Infosys Technologies Ltd, which projected a flattish sequential revenue growth of around 1.6 per cent for Q1, may beat its own estimates to post a growth of around 5-6 per cent, analysts said.

Any higher growth than this would be seen as a surprise, analysts said adding the fears expressed by the management over clients' compliance issues could have waned.

A strong Q1 growth may result in the company revising full-year guidance, analysts said.

TCS may show a sequential revenue growth of around five per cent, primarily driven by an uptick in volumes. However, seasonal weakness in domestic business may impact its earnings, analysts said.

Foreign exchange losses due to the rupee appreciation against the European currencies, coupled with a sluggish performance by its BPO outfit and a weak seasonal quarter for domestic IT business may force Wipro to declare a muted revenue growth.

Wipro bills close to 18 per cent of its revenues in European currencies. Since March 31, the rupee has appreciated by about six per cent against the pound and by seven per cent against the euro. This may impact Wipro's margins more compared to its peers, analysts said.

Satyam Computer, which had projected a Q1 revenue growth of between 5.1 per cent and 5.4 per cent, may see a revenue growth of around eight per cent primarily driven by good volumes.

However, the company may face some pressure on margins due to salary hikes, which it effected during the quarter, but may announce upgrade to its full year guidance, analysts added.

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