TCS, INFOSYS, WIPRO, HCL TECHNOLOGIES AND TECH MAHINDRA TO EXPECT REVENUE DECLINE; EMPLOYEES AFFECTED? - REPORT! 

As the first quarter earnings of FY21 begins, top leading Indian IT sectors are expected to report the full impact of coronavirus on business and client concerns. Looking at their exposure to troubled sectors like retail, aviation and hospitality and others, the revenue of the companies may drop between 4 percent and 8 percent. 

According to a Live Mint report, concerned analysts will watch out for pricing pressure, outsourcing revenue, BFSI and pharma and healthcare performance for signs of distress. 

Meanwhile, as per a report by Emkay Global, Tier-I companies like TCS, Infosys, Wipro, HCL Technologies and Tech Mahindra are expected to report a 4-6 percent sequential dollar revenue decline and other Tier-II companies may report a 4.5-8.1 percent fall in the April-June quarter. 

Even, the EBIT margins will fall sequentially, but the impact may be limited by currency depreciation and tight costs controls, analysts say.  

“We are largely expecting Q1 to be the rock bottom. Almost 75 percent of the IT clients have remained stable across sectors like BFSI, utilities, healthcare and communications. These areas are likely to witness a 3.5 to 4 percent revenue decline. The remaining 25 percent of IT revenues across retail, transport, hospitality and aerospace will experience revenue decline in the range of 10-15 percent," said Amit Chandra, IT Sector analyst, HDFC Securities.

Reports also suggest, retailers that TCS or HCL have exposure to were lesser impacted by the pandemic than those Wipro was exposed to. "What is more important is for companies to guide whether the impact ends in Q1 or continues further," said Chandra. 

Pointing over details, analysts further say that revenue decline will be offset by cost optimization across travel costs, currency appreciation and absence of wage hikes which will protect margins against a sharp decline. 

"With sectors like retail- apparel and department stores- and aerospace experiencing complete absence of business for almost two months during the quarter, these clients are likely to lead pricing pressure on the IT companies and also delay payments so DSO (Days sales outstanding) will be a key metric to watch. In addition, with companies vary of processing large deals during such times, the focus will shift to renewals of existing deals," said an IT sector analyst. 

Meanwhile, the pandemic has resulted in a wave of unemployment across sectors around the world after which IT companies informed that they will continue to honour existing job offers even if they restrict lateral hiring amid the crisis.