The Hindu Business Line : IT firms may post good Q1 numbers

Analysts expect the firms to report numbers ahead of the guidance, while negative factors such as increasing wages and visa costs are likely to dent margins of most firms.

The consensus estimates indicate that IT firms may report topline growth of 6-11 per cent on a quarter-on-quarter basis.

While no major positive surprises are expected, the decline in rupee against the dollar should contribute to the revenue growth, they said.

The rupee has fallen by over two per cent against the dollar during the April-June quarter and by about 6-7 per cent against the euro and the pound.

This could largely impact the margins positively, the analysts said.

However, the annual salary hikes effected by several firms during the quarter could keep margins under pressure.

Most companies, except Wipro and Satyam, have effected 15-18 per cent salary hike during the quarter.

The visa costs should also impact the margins to some extent. IT firms normally apply for the required visas during the June quarter.

But, the analysts said, that a robust volume growth during the quarter should offset the impact of salary hikes and visa costs.

Infosys, which projected revenue growth of 6.4-7.3 per cent for the first quarter, may beat its own estimates to post 9-10 per cent growth.

Any higher growth would be seen as a surprise, the analysts said, adding that profits are seen growing at 5-7 per cent, ahead of the guidance.

The salary hike and visa costs might dent the operating margins by 75-80 basis points.

TCS may show a sequential revenue growth of 7-9 per cent, primarily driven by strong volumes.

It may also see a decline in margins primarily due to salary hikes to offshore employees.

Wipro is also expected to exceed its guidance of 4.3 per cent in dollar terms for the technology business and post modest growth, which is likely to be driven by improved utilisation levels.

But the weak seasonal June quarter for domestic IT business may force Wipro to declare a muted revenue growth on an overall basis.

Satyam may report strong topline growth of 6-7 per cent, exceeding its guidance of four per cent, primarily on account of volume growth.