INSUBCONTINENT EXCLUSIVE:
ET Intelligence Group: The potential revenue loss for the top five information technology (IT) companies in the March 2020 quarter due to
the Covid-19 pandemic may be capped at 2 per cent or around $300 million (approximately Rs 2,200 crore), shows an ET Intelligence Group
analysis.
Historically, these companies have posted 1 per cent-2.5 per cent topline growth in dollar terms in the fourth quarter
This is likely to shrink in the range of negative 0.5 per cent to 0.5 per cent, thereby giving rise to the potential shortfall.
The impact
will be limited in the March quarter, but will intensify in the June quarter since business activities in the major markets of the US and
Europe were affected due to the effects of the pandemic from the second fortnight of March
These markets together contribute over four out of every five dollars to the revenue of top-tier companies including TCS, Infosys, HCL Tech,
revenue decline or growth for the March 2020 quarter
Broking in a report.
Compared with the previous quarter, top IT companies are expected to report marginal drop in dollar revenues while the
weaker rupee against the dollar may support the growth in the rupee denominated revenue.
According to the average of ETIG estimates and
forecasts by five brokerages, the aggregate dollar-denominated revenue of the top five companies will drop sequentially by 0.1 per cent
In rupee terms, revenue will grow by 1.3 per cent while net profit may fall by 2 per cent from the previous quarter.
The IT companies are
also expected to report pressure on billing and higher receivables due to likelihood of increase in the days sales outstanding (DSO) or
Capital Market in a report.
The Covid-19 impact on the IT sector will be more pronounced in the first two quarters of FY21 which is expected
to weaken the full-year earnings forecast
Securities noted in a report.
For FY21, it expects the sector to post dollar revenue and net profit decline of 0.5 per cent and 4 per cent
compared with the 7.5 per cent and 3 per cent growth in FY20 respectively.
