Software exporters on strong revenue growth in Q3

Mumbai: Software exporters are set for a weak earnings season with some of them finding their EPS growth falling to the tune of 15 per cent, despite strong revenue growth of 2.6 to 6 per cent in the seasonally weak quarter ending December, according to a report.

The December 2021 quarter earnings season will begin later this week or early next week with industry leaders TCS and Infosys announcing their numbers. In a report released on Monday, Kotak Institutional Equities has forecast a strong 2.6 to 6 per cent sequential revenue growth in the seasonally weak quarter for a three-month period ending December 2021. But, the picture is not rosy on EPS (earnings per share) growth with a decline of 15 per cent for some and to a growth of 11 per cent for others annualised, it added.

According to the report, HCL, Wipro and Tech Mahindra will lead the growth chart among large-caps and LT Infotech (LTI) among mid-caps of the industry that has seen strong headcount addition with higher fresher intake, amid high attrition on one hand and muted total new contracts on the other, but strong actual deal-making. December is a seasonally lean period due to furloughs. Despite the impact of furloughs, the report sees strong revenue growth led by high discretionary and continuing transformation spending. While Wipro, Tech Mahindra and HCL will likely deliver 4.5 per cent growth in constant currency terms, Infosys is likely to login in a 3.7 per cent topline (revenue) growth and industry leader TCS a modest 2.6 per cent on-quarter growth, the brokerage said.