HCLTech is expected to post a marginal sequential growth in its July-September quarter earnings. According to an average of six brokerage firms, the company’s revenues are expected to increase 2% sequentially to Rs 28,605.7 crore. HCLTech will announce its results on Monday.
Phillip Capital has forecast a 0.5% quarter-on-quarter (QoQ) revenue growth, with IT services expected to grow by 1.3% QoQ, supported by a revival in the banking, financial services, and insurance (BFSI) sector. However, this growth is seen to be offset by a 0.8% impact due to the divestiture of the State Street business.
Similarly, Nuvama Institutional Equities sees a 1.3% growth, which is expected to come mainly from IT services and engineering, research, and development (ER&D).
Operating margin or earnings before interest and tax (EBIT) margins for the second quarter are projected to improve by 90 basis points quarter-on-quarter to 18% largely due to the company’s revision in wage cycle and rupee appreciation.
Nomura has projected a 120 bps improvement, citing the company’s decision not to issue salary hikes in the second quarter. On a similar note, Nuvama anticipates a 70 bps improvement, while Kotak Institutional Equities expects a 100 bps increase, attributing this to seasonal improvements after resets in the June quarter and changes in the wage revision cycle.
JM Financial also estimates a 70 bps expansion, supported by favourable currency movements and operational improvements. Phillip Capital expects margins to expand on the back of absence of productivity pass backs from the previous quarter and enhanced operational efficiencies.
Further, HCLTech is expected to maintain its guidance of for FY25 at 3-5% in constant currency terms, along with an Ebit margin of 18-19%.
Deal Wins and Vertical Performance
Brokerages said deal wins in Q2 have shown varied performance, with Kotak Institutional Equities projecting a sequential increase of 15% in deal total contract value (TCV) to $2.2 billion. However, on a year-on-year (yoy) basis, TCV is expected to decline, considering the high base of $2.1 billion from the previous year’s Verizon mega-deal.
Further, performance across different verticals has been mixed. The BFSI sector, which has shown signs of recovery, is a key area to watch, according to Kotak and Nomura.
Meanwhile, the products business is expected to decline, as per Kotak and Phillip Capital, with growth primarily driven by the services segment excluding the State Street BPO.
From: financialexpress
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