As top software exporters prepare to report fourth-quarter numbers for 2018 financial year, the Indian IT industry could see a marginal revenue acceleration, even as it feels the tremors caused by a combination of factors — from changing client requirements to clampdown on tech worker visas.

Infosys, which will be the first to get off the blocks on April 13, is expected to post a 1.4 per cent revenue growth for the fourth quarter, improving on the 1 per cent growth it posted in the third quarter. This should result in the country’s second-largest software exporter finishing the FY around 6.5 per cent, meeting its expectations but posting a second consecutive year of single-digit growth.

Further, Infosys is expected to guide for full-year revenue growth in the range of 6.5-8.5 per cent, as new CEO Salil Parekh plots the company’s growth strategy going forward.

Meanwhile, the country’s largest software exporter TCS — which will post its quarterly numbers on April 19 — is expected to post 1.1 per cent growth. TCS does not give annual revenue guidance but has bagged deals worth $7 billion recently. As TCS ramps up these deals in FY19, analysts believe that it needs to turn around its BFSI vertical.

Wipro could post similar growth numbers and in a seasonally weak quarter, it would be interesting to listen to management commentary in the energy vertical, which is stabilising due to less volatility in oil prices. While Tech Mahindra is expected to report 1.3 per cent revenue growth, analysts expect HCL Technologies to clock 2.2 per cent growth.

Shift in billing

Generally, the fourth-quarter numbers tend to be on the lower side due to clients of outsourcing companies making their annual IT budget plans. However, for the past five years that logic seems to have gone out of the window, as clients are moving away from a headcount-based billing to result-oriented billing, with a focus on digital services.

Analysts point out that as companies grapple with issues around visas, changing client requirements and fast-changing technologies, macroeconomic factors are getting favourable, albeit slowly. Recovery in the US economy and growing acceptance in Europe are positives, according to Urmil Shah, IT analyst, IDBI Securities.

Other tailwinds

Some other tailwinds could also come from favourable currency movements. Sandip Agarwal of Edelweiss Research pointed out that a 100-120 basis points cross-currency tailwind would boost companies as major global currencies such as the GBP, Euro and Australian dollar appreciated against the US dollar in the quarter.

This would result in favourable margins for software exporters, which are reeling under price pressures and struggling to maintain margins consistently. Margins are expected to remain steady — up 20-50 basis points for the top five companies, said Agarwal.

Industry watchers foresee growth uptick in BFSI for most of the companies, in combination with rising outsourcing in Europe.

“We expect the geography to sustain its outperformance over North America,” said Agarwal. HCL Tech is expected to give growth guidance of 8-10 per cent.

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