The IT services sector in India is gearing up for a low first-quarter performance of the FY25, with top players expected to record marginal growth or no growth at all. Firms like Tata Consultancy Services (TCS), HCLTech, Wipro, and Tech Mahindra are likely to report minimal growth in single figures or a loss in revenue on a year-on-year basis on constant currency terms. The estimates also indicate low conversions of deals and long decision-making cycles for clients.
Infosys and LTIMindtree can be moderately prosperous at a 2% growth, with comparatively stable implementation and ramp-ups of projects. TCS shall initiate the earnings announcements on July 10. The general economic uncertainty and conservative tech spending among enterprise clients in key markets are likely to be observed in the current quarter.ddd
Medium-sized IT companies like Coforge, Persistent Systems, Hexaware, and Mphasis will have better results than the leading ones. According to analysts, these companies are advantaged by niche services and specialisation in high-volume verticals. Conversely, there might be pressures on companies such as LTTS, Cyient, Birlasoft, Tata Elxsi, and Tata Technologies because of lower demand in the manufacturing, auto, and retail sectors.
Brokerage reports by Kotak Institutional Equities, among others, indicate that deal pipelines in sectors like the automotive industry are strong; however, execution delays are still hurting the revenue realisation. The deferrals and reviewing of contracts have been extended to approximately 10-15%.
IT firms have employed a range of cost management approaches to safeguard margins. These include decreasing travel budgets, controlling discretionary budgets, and, in certain instances, cutting variable repayment. However, margin performance is likely to vary throughout the board.
Cases of ramp-down in government projects may affect TCS, reducing utilisation levels. Infosys might miss a little margin due to paying top-level talent a higher salary and because of more travel. HCLTech will absorb the effects of seasonality in terms of costs, whereas Wipro could experience an aggravated burden of increased provisions regarding problems with its clients.
Meanwhile, smaller players such as Coforage can record margin improvement, and Nomura expects a sequential increase to 40 basis points. Mphasis and Persistent Systems will also sustain consistent margins. Investor sentiment in the BSE IT index was up 3.7% last month and 7.7% in three months, implying caution in the sector.