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earnings | IST

All eyes on Infy, Wipro & HCL as IT sector under pressure post TCS earnings; here’s why

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After Tata Consultancy Services (TCS) earnings, all eyes on Infosys, Wipro and HCL Technologies, which report numbers towards the end of the week on Wednesday, October 13 as well as on Thursday, October 14.

After Tata Consultancy Services (TCS) earnings, all eyes on Infosys, Wipro and HCL Technologies, which report numbers on Wednesday, October 13 and on Thursday, October 14.
TCS earnings were not bad per se; had 16 per cent revenue growth year-on-year, but the expectations were elevated and even for the rest of the tier-one IT pack the expectations are running high.
Therefore, for Infosys, expect 5.5 per cent dollar revenue growth sequentially. For Wipro, 6.5 per cent revenue growth and for HCL Technologies, it could be a growth figure close to 4 per cent.
On margins, TCS reported a miss versus expectations; the issues they highlighted appears to be industry-wide. So higher subcontracting costs, cost to backfill attrition because as more and more people leave the company there is a need to hire extra people to replenish that and that is, of course, hurting the company. So, for TCS, they managed to hold on to their margins but for the rest of the pack, expect margins to crunch down but will the actual numbers be lower than the consensus expectation, that remains to be seen.
The focus will be whether Infosys and HCL Technologies up their full-year revenue guidance, which is what the street expects. Second, it will be attrition.
In fact, Kotak said that if TCS reported an attrition number close to 12 per cent then for the rest of the industry the attrition could be close to 18 to 20 per cent.
Are deal wins moderating? That is a trend that is going to be very crucial. Europe is subdued for TCS and is that a trend seen across the pack.
In terms of the rest of the large-cap IT names, it's Wipro, which has seen the most rerating with the stock up 70 per cent so far this year
 
Watch the accompanying video of CNBC-TV18’s Reema Tendulkar for more details.