In Q4 FY 2014/15, IT giants to take a dip

The following article is based on my own interpretation of the said events. Any material borrowed from published and unpublished sources has been appropriately referenced. I will bear the sole responsibility for anything that is found to have been copied or misappropriated or misrepresented in the following post.

PNS Satish Kumar, MBA 2014-16, Vinod Gupta School of Management, IIT Kharagpur.

With the corporate results seasons around, large cap IT companies are lining up to announce their Q4 results for the fiscal year 2014-15. TCS will be kicking off the season by announcing its results on 16th April, 2015 followed by HCL technologies (21st April, 2015) and Infosys (24th April, 2015).Tech Mahindra and Cognizant will post their results later on.

It is expected that these IT giants are likely to post their worst Q4 results since 2010 for an ample of reasons. Adding to the seasonal weakness of the final quarter of the fiscal year, issues of currency volatility would be of prime cause for this dip according to some analysts. They believe that the cross currency volatility will hit sequential revenue growth and profit margins of top IT firms in reported currency. It is expected that there would be a 2-3% lower growth rate than that of preceding quarter, i.e. Q3.

TCS, the country’s largest software exporter, is expected to post sequential revenue growth of 0.2 per cent , Wipro 0.5 per cent , and Infosys less than 1 per cent for the March quarter, according to brokerage India Infoline. Cognizant has forecast sequential revenue growth of about 5 per cent, factoring in the TriZetto acquisition.

Rupee appreciation and euro depreciation rates would increase the cost of IT for European clients. While clients may adjust to higher IT costs for existing operations, they may cut some ‘nice-to-have’ / discretionary projects. Experts tracking India’s $146-billion IT industry said a number of companies are also facing client-specific issues such as delays in ramp-ups in some business verticals and weakness in some business lines, resulting in lower revenue from those accounts and aggravating an already tepid quarter.