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With the country’s blue-chip software services companies posting strong September-quarter earnings indicating renewed confidence among clients in its largest markets and a healthy surge in outsourcing demand, the Indian IT sector has already set the festive mood ahead of the Diwali celebrations.
While the leader Tata Consultancy Services (TCS) and fourth-largest player HCL Technologies have maintained a steady revenue growth despite a slowing global economy, both the Bangalore-based IT majors Infosys and Wipro have now joined the club shaking off a spell of sluggish top-line growth seen over the last two years.
Backed by buoyancy in America and Europe and aided by rupee depreciation, top-tier IT firms have recorded a sequential dollar revenue growth of over 3% during the July-September stretch. TCS led the pack with a 5.4% growth followed by Infosys at 3.8% and HCL Technologies recording a 3.5% quarter-on-quarter growth. However, Wipro was still behind its peers with 2.7% dollar-revenue growth, though it did make some strides towards regaining some of its old glory.
The management commentary during the quarter was uniform across the software-services majors projecting an early sign of an upturn in IT spend globally, unlike in the past where establishing a common trend across the sector was difficult. However, the companies indicated that going by the current business environment, visibility into client spends, remains limited to a single quarter.
For the Indian IT biggies, North America, which contributes over 60% of the revenues, has seen more than 3% growth for all top-four players on a sequential basis with HCL Tech leading the pack with a robust growth rate of 4%. In Europe, TCS recorded a spectacular show of almost 20% sequential growth followed by Infosys at 5.2% and HCL Tech at 2.6% quarter-on-quarter. The European continent fuelled some large deals for the software-services firms during the quarter despite the region’s macro-economic concerns.
In terms of operating margin, TCS widened the gap with its nearest rival Infosys by another 3% during the September quarter, while the NR Narayana Murthy-led firm remained steady during the period. Mumbai-headquartered TCS reported an operating margin of 30.2%, which was a 3% increase from the previous quarter, while for Infosys it stood flat at 23.5%, even without including the provision of R219 crore for visa related matters. A year ago, the operating margin between the two companies were almost similar.