Investment bank Barclays says Wipro and HCL Tech are likely to see margin expansion from a weaker rupee. For TCS and Infosys, the gains are likely to be limited. All four are likely to report some forex losses on outstanding hedging contracts though.
Wipro is likely to deliver the slowest sequential dollar revenue growth and TCS the fastest followed by HCL Tech.
Here's what to expect from India's biggest IT firms in the June quarter.
1) TCS: Highest growth among the top four
The company is likely to report quarterly revenue growth of 1.7 per cent (quarter-on-quarter) in dollar terms. This incorporates the negative cross currency impact of 1.5 percentage points; in constant currency terms growth is projected at 3.2%.
Margin expansion at TCS due to the currency appreciation is likely to be limited due to the salary increases and the quarterly variable payouts in the quarter. Overall loss due to currency fluctuation could be close to Rs 25 crore in the current quarter.
2) Infosys: Currency impact should test guidance
It is likely to lower its FY13 revenue guidance (in dollar terms) to 6.5-8.5 per cent from 8-10 per cent. Infosys had guided for 0-1 per cent sequential top-line growth in constant currency terms for the June quarter, but might report only -0.5 per cent sequential growth due to the cross currency impact of 1.5 percentage points.
Margins are likely to show limited further upside from currency, in line with recent management commentary of investing back into the business.
However, weak rupee could boost earnings per share guidance for FY13 by 10-12 per cent. The company could report a net loss of $10 million on account of the rupee depreciation.
3) Wipro: Lowest sequential growth in the peer group
The company had guided to -1 per cent to +0.9 per cent sequential revenue growth for IT services in the June quarter, but is likely to show a 1.4% sequential decline because of cross currency impact. This includes the impact of cash flow hedges.
Wipro’s margin expansion due to currency is likely to be limited to 100 basis points; part of the gains from the rupee depreciation will be offset by cross currency impact and salary increases effected in April.
The company may guide for nearly 2 per cent sequential revenue growth.
4) HCL Tech: Benefiting from strong order backlog
The company’s performance in top-line growth is likely to remain strong. It may report 1.4 per cent (dollar terms) sequential revenue growth for the June quarter. Margins should expand by 70 basis points sequentially due to the weak rupee. The company could report a loss of nearly $10 million on account of forex losses.
(Based on the Barclays equity report on India software and IT services)