IT firms likely to report robust Q3

By agencies   |   Monday, 09 January 2006, 20:30 IST
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BANGALORE: Riding high on the outsourcing wave, information technology (IT) companies are expected to report a robust growth for the quarter ended on December 2005. The top tier firms, driven by strong volumes, are expected to post a sequential revenue growth of 7 to 12 percent for the third quarter of the current financial year, analysts said. Though no major surprises are expected from the top tier firms, analysts felt these companies would easily surpass their projected guidance for the quarter. The operating margins for the top tier firms, positively impacted by the rupee depreciation and lower visa costs, are expected to grow sequentially between eight and 15 percent for the quarter. The key IT stocks have outperformed the market during the December quarter, thereby supporting the positive trends on earnings. The key IT stocks saw a growth of 10-32 percent during the period, while the Sensex rallied by about 9 percent. With new ramp-ups, Tata Consultancy Services (TCS) and Infosys Technologies should report a stronger volume growth, analysts predicted. TCS and Infosys may see some revenues flowing from the multi-million-dollar ABN-Amro deal this quarter, which may not have any major impact. The IT major Wipro, which implemented a wage hike for its offshore employees during the third quarter, may see a flattish growth in margins despite a likely resurgent growth in IT services and a better performance in BPO business. However, the mid-sized companies may show a mixed performance, lagging behind the large players. MphasiS, Sonata Software and Aztec, among others, may spring some surprises, analysts said. Expecting strong growth this year in offshoring activities, analysts predicted that IT companies to fare better in the second half of the financial year 2006 as compared to the first half of the previous financial year. The integration of a series of acquisitions by TCS and Wipro would reflect in the improved performance for the fourth quarter, they added.