In the current quarter, IT companies are expected to witness a healthy improvement in revenues on a QoQ basis mainly led by ramp up of past deal wins, traction in digital technologies and easing of supply side pressure. The companies are seeing a demand tailwind in terms of cost takeout by clients (led by higher offshoring & automation), vendor consolidation opportunities and traction in cloud & customer experience. In terms of verticals, life-science & healthcare, telecom & media and financial services are witnessing healthy traction partly offset by pockets of weakness in travel & hospitality, oil & gas and manufacturing. Further, an improvement in utilisation (led by improving demand & easing of supply side pressure) is expected to positively impact revenues of IT companies. Also, cost rationalisation by IT companies, lower travel cost, cross currency benefits and utilisation are expected to drive margins in the quarter.
In midcap, Coforge, Tech Mahindra to report healthy margins
Tech Mahindra is expected to post a 152 bps QoQ improvement in EBITDA margins, mainly led by lower sub-contracting cost, easing of supply side pressure and cost rationalisation. Coforge is expected to report a 161 bps QoQ improvement in margins led by absence of Esop charges (~113 bps) and higher utilisation. On a YoY basis, Mindtree, LTI are expected to report improvement of 523 bps, 238 bps, respectively, due to a low base.
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