Infosys Expected to Outperform This Festive Season: Here’s How India’s Top IT Firms Stack Up

Brokerage firms like Axis Capital and Nomura are predicting strong growth for Infosys this festive season. They expect the company to see a 4% rise in revenue for the quarter ending in September 2024. HDFC Securities is a bit more conservative, forecasting a 3% growth. All of them agree that Infosys is set to outpace its main competitor, Tata Consultancy Services (TCS), whose revenue is expected to grow by only 1.5-2.4%.

According to Axis Capital analysts, Infosys’ growth will be driven by new deals and the integration of a recent acquisition. Earlier this year, Infosys acquired in-tech, a German automotive R&D company, which has contributed to its growth.

TCS, on the other hand, is relying on a major $1.83 billion deal with Bharat Sanchar Nigam Ltd (BSNL) to help drive its revenue. This deal helped boost TCS’ India business to 7.5% of its quarterly revenue, and analysts believe it will continue to fuel growth.

Despite this, both Infosys and TCS are expected to see their profit margins improve due to cost-cutting measures like reducing dependency on subcontractors and benefiting from currency fluctuations. However, some of these gains could be offset by salary increases.

How Other Top IT Companies Are Doing

HCL Technologies is also expected to grow, though at a slower pace than Infosys and TCS. Analysts predict HCL’s revenue will rise between 0.8% and 1.9%, with strong performance in most business areas except financial services. This growth will help compensate for a small dip in revenue after HCL sold its stake in a joint venture with US-based financial services company, State Street.

Wipro is likely to see the slowest growth among the top five IT companies. Analysts forecast a modest revenue increase of 0.4% to 1.5%, driven by its financial services and consumer sectors. Meanwhile, Tech Mahindra is expected to post revenue growth of 1% to 1.6%, helped by currency fluctuations and new deals, particularly in its enterprise and telecom divisions.

Both Wipro and Tech Mahindra recently appointed new CEOs, with Srinivas Pallia taking over at Wipro in April 2024 and Mohit Joshi at Tech Mahindra in December 2023. Both leaders are focusing on reviving growth through consulting and new investments.

Looking at the Full Fiscal Year

For FY25, India’s biggest IT companies are expected to perform slightly better than last year, which was one of their slowest growth periods. TCS, Infosys, and HCLTech saw revenue growth of 4.1%, 1.9%, and 5.4% respectively in FY24, while Wipro and Tech Mahindra reported declines of 2.2% and 5%.

Nasscom, the IT industry body, reported that the outsourcing industry grew at just 3.3% last year due to global economic uncertainty and reduced client spending.

HDFC Securities analysts believe the IT sector has already hit its lowest point and is now recovering. They expect the industry to achieve high single-digit growth over the next few quarters. They also highlighted that AI is creating new opportunities for the sector, helping to ease concerns about long-term growth.

Despite a lack of mega deals recently, improvements in decision-making and discretionary spending could help drive growth, even as companies focus on cost-cutting measures.

TCS will announce its quarterly earnings on October 10, followed by HCLTech on October 14. Infosys and Wipro will report on October 17, and Tech Mahindra on October 19.

Accenture’s Signals

Global IT giant Accenture recently reported $64.9 billion in revenue for the year ending in August 2024, with a yearly growth of 1.2%. In a call with analysts, CEO Julie Sweet said the global economic situation has remained relatively stable, though some events later in the year could impact the outlook for FY25. She added that while the US economy may slow down, Europe could see a slight improvement.