Muted Revenue Growth For Top Indian IT Firms In Q3

Muted Revenue Growth For Top Indian IT Firms In Q3

As per a report by Kotak Institutional Equities, top Indian IT companies will most probably experience low revenue growth in the December quarter. At the same time, mid-tier companies are expected to give improved performances. The report stated that though there are reasons to be positive on demand and revenue conditions, yet the expected changes in the US visa rules as well as the US tax reforms remain a problem for the sector.

Kotak Institutional Equities in its research said that muted revenue growth was expected for Tier I players due to the usual year-end absence and continued ease of work in banking financial services (BFS) and North America.

At the same time, mid-tier companies are expected to report a higher growth powered by an increase in deals.

The rate of revenue growth for Indian IT companies witnessed a downfall in the year 2017 on account of decelerated growth in Banking Financial Services, regulatory issues in the US healthcare department and other similar challenges in the retail vertical.

The rate of revenue growth of domestic IT companies were severely affected by the changes in sourcing strategy of clients as well as the slow growth on digital vertical along with the sub-optimal involvement of Indian IT firms.

Investor focus will be the main aim of 2018. As per the report, IT budgets and demand outlook, especially in the case of lagging areas of 2017, increase in digital spends, and industrialization of digital services will take a fore front.

Implications of US tax reforms and H-1B dependency would be the other areas of investor focus.

If official reports are to be believed, the imposition of Base Erosion and Anti-abuse Tax (BEAT) on payments by the US companies to its foreign affiliates will also hold an impact on selected Indian IT companies. Investors may also place their focus on H-1B dependency.

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