Indian IT Sector’s Q2 FY25 Growth: Infosys, TCS, and HCL Technologies Lead the Way
The Indian IT industry is set to show decent revenue growth for the second quarter of FY25, though it may not meet high market expectations. Analysts from Motilal Oswal predict a gradual recovery in client spending, with growth focused on areas like U.S. banking. While healthcare and manufacturing are expected to drive growth, the overall results might not satisfy those hoping for a stronger rebound.
Revenue and Growth Projections
The sector is expected to achieve year-on-year growth in revenue, EBIT, and PAT of 5.1%, 5.0%, and 5.3%, respectively. Leading companies such as Infosys, Tata Consultancy Services (TCS), and HCL Technologies are forecasted to see revenue growth of 5.5%, 5.9%, and 4.9%, respectively, for FY25.
Performance of Tier-I and Mid-Tier Companies
For Tier-I companies, sequential revenue growth is projected to be between flat and 3.0% in constant currency terms, with Infosys expected to lead. TCS is anticipated to report 1.0% growth, while HCLT may see flat growth at about 1% quarter-on-quarter. Among mid-tier companies, Persistent Systems is likely to post the strongest growth at 4.5%, driven by the healthcare sector, followed by Coforge at 4.0%.
Margin Expectations
The sector’s margins are expected to remain stable. TCS might see a 20 basis point decline due to the BSNL deal and talent investments, while Infosys could face an 80 basis point margin contraction. HCLT might experience a slight margin increase, though wage hikes could pose challenges. Mid-tier companies like Coforge and PSYS may have mixed margin outcomes, with wage hikes affecting Coforge by 100 basis points but partially offset by optimization at PSYS.
Guidance and Market Position
Infosys is expected to upgrade its guidance, aligning with consensus estimates, while the sector is unlikely to face significant downgrade risks. Cross-currency movements are projected to provide a 30-60 basis point benefit to most companies. Mid-tier players like PSYS and Coforge are expected to excel due to their strong positions in high-growth sectors such as BFSI and healthcare.
Doubts Revealed
Q2 FY25 -: Q2 FY25 refers to the second quarter of the financial year 2025. In India, a financial year starts on April 1st and ends on March 31st of the next year. So, Q2 FY25 would be from July to September 2024.
Infosys, TCS, HCL Technologies -: Infosys, TCS (Tata Consultancy Services), and HCL Technologies are big companies in India that provide IT services. They help other businesses with technology solutions like software development and IT consulting.
Revenue Growth -: Revenue growth means the increase in the amount of money a company earns from its business activities over a period of time. It shows how well a company is doing financially.
U.S. banking -: U.S. banking refers to the banking sector in the United States. It includes banks and financial institutions that provide services like loans, savings accounts, and investments.
Mid-tier companies -: Mid-tier companies are businesses that are not as large as the biggest companies but are still significant in size. They often have fewer resources than the largest companies but can be more flexible and innovative.
Persistent Systems, Coforge -: Persistent Systems and Coforge are Indian IT companies that are smaller than Infosys, TCS, and HCL Technologies. They provide technology services and solutions to various industries.
Margins -: Margins refer to the difference between the cost of making a product or providing a service and the price at which it is sold. It shows how much profit a company makes from its sales.
Wage hikes -: Wage hikes mean an increase in the salaries or wages paid to employees. Companies may raise wages to keep their workers happy and motivated, but it can also increase their costs.
