IT Services | Earnings Preview By BP Wealth

Strong US and European economy to boost demand – Q1 FY15 to be a strong one

Improving demand environment in the west, rise in discretionary spending bodes well for the IT sector

We expect the June quarter (traditionally the strongest) performance to be a modest one, specifically on the volumes growth and dollar revenue growth front, primarily due to revival in discretionary spending, improvement in demand environment and traction in deal flows (both renewals and transformational deals). We expect volumes growth for Top five IT companies to be in the range of 2-4% in Q1
FY15. Currency movement stood more or less stable in the quarter with INR appreciating against USD (Q1 FY15 average stood at Rs 59.8 a appreciation of 3.1% q-o-q). Moreover, cross currency movement stood favorable and will have ~30-50 bps +ve impact on USD revenues (USD depreciated 0.1%/1.7%/3.9% q-o-q against Euro (EUR), GBP and Australian dollar (AUD) respectively). On the pricing front we expect it to be stable to positive as clients are willing to spend on discretionary projects while pricing on deal renewals can be under pressure. We have taken a 0.5% q-o-q increase in pricing. Taking all these factors into account we expect dollar revenue growth to be in the range of 2.1-5.1% for the quarter.

Download BP Wealth IT-Services Report