By Sethuraman N R
BENGALURU (Reuters) – HCLTech, India’s No.3 IT services exporter, on Thursday forecast lower-than-expected revenue growth for the current fiscal due to cuts in discretionary spending and project ramp-downs amid worries of a global recession.
HCLTech’s weak outlook followed disappointing earnings from market leader Tata Consultancy Services and No.2 Infosys Ltd’s forecast of single-digit revenue growth this financial year.
HCLTech said it expects revenue to increase 6%-8% in the financial year ending March 2024 on a constant currency basis, missing average analysts’ estimates of 10.42%, according to Refinitiv IBES data.
“In tech and telecom, growth decelerated in the second half (of the year). There is still pressure in the segment and rampdowns. We think most of the pain is behind us. But the environment across the board has been volatile,” CEO C Vijayakumar said.
There is some stress in terms of deals as well as project ramp-up delays, especially on the discretionary spending side, Vijayakumar added.
Indian IT services companies, especially the larger ones, are likely to be hit by the turmoil in the U.S. and European financial ecosystem since mid-March as they account for a lion’s share of revenue both by geography and sector.
GRAPHIC – IT service sales slowing down
https://www.reuters.com/graphics/HCLTECH-RESULTS/klvygmxogvg/chart.png
However, HCLTech said that its exposure to the U.S. banking crisis was very limited.
“We do see a deterioration in the demand environment, especially on the telecommunication and manufacturing verticals, which also becomes evident in the FY24 revenue guidance,” said Manish Chowdhury, head of research at Stoxbox.
HCLTech reported a 10.9% rise in consolidated net profit at 39.83 billion rupees ($484.93 million) for the quarter ended March 31.
Its earnings before income tax (EBIT) margins fell to 18.18% from 19.6% in the previous quarter. It expects EBIT margins of 18%-19% for FY 2024.
The company’s revenue from operations rose 17.7% to 266.06 billion rupees.
($1 = 82.1350 Indian rupees)
(Reporting by Nallur Sethuraman in Bengaluru; Editing by Janane Venkatraman and Sohini Goswami)