Big IT’s dollar revenues may rise 2-3% sequentially in Q3

ET Intelligence Group: The top five Indian IT companies are expected to report 2-3 per cent sequential growth in dollar-denominated revenue for the December 2018 quarter. Commentary on the digital spends by clients and the trend in transformational deals will be crucial.The third quarter of a fiscal is seasonally weak for Indian software companies due to holidays and budget revisions by global clients.The rupee’s depreciation should help the realisations whereas crosscurrency effects may partially offset this benefit. The rupee fell by 2.8 per cent on average sequentially against the dollar in the December quarter.A weaker domestic currency helps exporters by lifting up realisations. However, other major currencies including the pound and the euro depreciated by 1.4 per cent and 1.9 per cent respectively against the dollar during the period. 67343667 Since revenue in these currencies is first converted into dollars and then into rupees for accounting purposes, the cross-currency weakness is expected to partially offset the benefit of weaker rupee. The top IT companies earn nearly one-third revenue in currencies other than the dollar.“In light of the dollar’s appreciation vis-à-vis global currencies, we yet again anticipate cross-currency headwinds of 40–60bps for the top-five Indian IT players,” mentioned Edelweiss Securities in a report.According to the ET Intelligence Group’s estimates, the top five IT companies are expected to report 4.1 per cent sequential growth in the rupee denominated revenue for the third quarter. Net profit will grow by 4.5 per cent.The sample includes Tata Consultancy Services (TCS), Infosys, HCL Technologies, Wipro and Tech Mahindra.Among the sample companies, TCS is likely to report the fastest growth of 4.4 per cent in rupee revenue at Rs 38,491.9 crore. Its net profit is expected to grow at a similar rate to Rs 8,264.3 crore.The operating profitability of the sample companies may improve following weaker rupee.“We expect margins at the top-five IT companies to expand 70–100 bps (basis points, 100 bps equals 1 percentage point) driven by rupee depreciation and operational efficiencies,” Edelweiss said.

from Economic Times http://bit.ly/2ApMSNI