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Informist, Saturday, Jul. 19, 2025

 

By Anjana Therese Antony

 

MUMBAI – While there seems to be no immediate respite from muted earnings growth for India's large-cap information technology companies, it is likely that most mid-cap players will continue to fare much better than the industry giants in the June quarter. Various broking firms believe the sector is showing some signs of resilience as the deterioration in demand is not as bad as what was expected at the beginning of the June quarter, even as uncertainty about US tariffs continues to keep clients tentative.

 

The likely impact of tariffs on the US economy and consequential risks to the domestic IT players' business in the US have been pushing investors to keep a distance from the sector. Indian IT companies earn more than half of their revenue from the US.

 

The aggregate net profit of the 13 IT companies that are part of the Nifty 200 index is expected to fall almost 2% on quarter to INR 312.47 billion. If so, this will be the first sequential decline in profit for the IT sector in four quarters. The seven mid-cap companies' cumulative bottom line is seen rising 1% on quarter, which is better than the 2?cline anticipated for the six large-cap players at an aggregate level.

 

In the previous four quarters, too, mid-cap players had mostly outperformed their larger peers. Their net profit in the March quarter rose over 11% sequentially, while the large-caps together posted just 0.8% growth. Their revenue increased more than 3% on quarter, while the larger peers saw just a 0.2% rise. 

 

The six large-cap IT companies in the Nifty 200 index are Tata Consultancy Services, Infosys, HCL Technologies, Wipro, LTIMindtree, and Tech Mahindra, and together account for more than 90% of the sector's revenue. Of these, Infosys is the only one yet to release its results; these are due next week. The remaining seven are mid-cap companies - Coforge, KPIT Technologies, Mphasis, Oracle Financial Services Software, Persistent Systems, Tata Elxsi, and Tata Technologies. The last two released their quarterly earnings this week. 

 

The total revenue of these mid-cap players is expected to grow over 3% sequentially to INR 163.15 billion, which is much higher than the mere 0.4% rise estimated for the large-cap group and also better than the 0.7?cline anticipated for the overall sector. "Smart deal structuring, share gains and favorable portfolio (low exposure to manufacturing sector) will drive strong growth for mid-tier (IT companies)," Kotak Institutional Equities said in its pre-earnings report. 

 

SHOWSTOPPERS

Mid-cap companies Coforge and Persistent Systems are widely expected to showcase the fastest earnings growth in the sector in Apr-Jun, according to various broking firms. The expected 30% sequential growth in Coforge's consolidated bottom line and the 9% rise in its top line will likely be the highest growth figures for the industry. Persistent Systems' 6% rise in consolidated net profit will likely be the second-biggest growth figure, while its near 4% rise in revenue will be the third-highest in the pack. 

 

What is expected to push Coforge's financial growth is its $1.56-billion deal with US-based Sabre Corp., which was signed in March. In May, the company had said the deal ramp-up is expected over three quarters. For Persistent Systems, it is the company's cost-efficiency measures and its core banking, financial services, and insurance business that will drive its growth in the reporting quarter. 

 

Mphasis is likely to be the third-best performer in the sector, with its consolidated net profit seen rising nearly 3% sequentially and revenue expected to rise 1%, supported by deal ramp-ups. The company's new deal wins are likely to grow 10% on quarter to $400 million-$500 million, brokerage Kotak said. Its earnings before interest and tax margin is also likely to rise 10 basis points sequentially to 15.4% in the latest quarter. 

 

BACK BENCHERS

While most mid-cap peers are likely to outperform the overall sector and larger entities, KPIT Technologies is likely to post the sharpest fall in net profit, down 19% on quarter, while revenue is seen rising marginally. This will be due to a slower ramp-up of deals won in the March quarter, ICICI Securities said, adding that the company's auto vertical continued to see weak demand. "Deal closure cycles are elongated and pace of ramp-up of existing deals is slowing," it said. 

 

Another laggard in the sector will likely be India's second-largest IT giant, Infosys, whose bottom line is seen falling almost 4% sequentially, while the top line is expected to rise 2%, as per the average of estimates. However, the Bengaluru-based company is expected to raise its revenue growth guidance for 2025-26 (Apr-Mar) to 1-4% in constant currency terms from 0-3% announced in the previous quarter and maintain the margin guidance of 20-22%, Nuvama Institutional Equities said. The company had said the 0-3% revenue growth guidance factored in the impact of wage hikes and increasing uncertainty around the impact of US tariffs. 

 

RESULTS SO FAR

IT behemoth TCS had kickstarted the earnings season last week, reporting a higher-than-expected bottom line for the June quarter, but the company missed estimates for its top line. The company cited continued delays in clients' decision-making in terms of discretionary spending amid a hazy outlook about US tariffs as the reason for the hit to revenue. Some broking firms also said the demand environment will remain challenging for at least two more quarters, but the medium-to-long term outlook is still positive for the sector. 

 

Other giants such as HCL Technologies, Wipro, and Tech Mahindra, too, reported weak financial growth and their management comments had only cautious optimism. Investors were disappointed with HCL Technologies' surprise reduction in its margin guidance to 17-18% compared to 18-19?rlier. Brokerages are divided on the company, with a few downgrading the stock due to limited upside, while some retaining their recommendations. 

 

Even though mid-cap company Tata Technologies reported sequential weakness in earnings growth, the fall in metrics was lower than expected and its share price rose on hopes of recovery from October. But investors did not cheer a similar weakness in Tata Elxsi as the company posted the sharpest decline in its bottom line since 2019. 

 

Following are the Apr-Jun earnings estimates for 13 IT companies which are part of the Nifty 200, based on reports from 20 brokerages:

 

Company Name	Net Sales (INR  million)	Net Profit  (INR  million)	Net  Sales  Y-o-Y  % Change	Net Profit Y-o-Y  % Change	Net Sales Q-o-Q  % Change	Net Profit Q-o-Q % Change	EBITDA	Earnings  Date	No. of  brokerages  polled
Coforge +	37,258.8	3,390.3	55.2	154.5	9.3	29.8	6,459.5	Jul 25	14
HCL Tech +	303,203.5	42,288.6	8.1	(0.7)	0.2	(1.8)	62,709.6	Jul 25	17
Infosys +	418,317.5	67,845.3	6.4	6.5	2.2	(3.5)	101,013.6	Jul 25	17
KPIT Technologies +	15,293.3	1,980.1	12.1	(3.0)	0.1	(19.1)	3,165.3	Jul 25	8
LTIMindtree +	98,417.1	11,907.0	7.6	5.0	0.7	5.5	16,708.6	Jul 25	17
Mphasis +	37,566.3	4,593.6	9.8	13.6	1.3	2.9	7,069.9	Jul 25	15
Oracle Financial Services Software +	18,315.0	6,415.0	5.2	4.0	6.7	(0.4)	N.A.	Jul 25	1
Persistent Systems +	33,549.9	4,196.9	22.6	37.0	3.5	6.0	6,131.3	Jul 25	16
Tata Elxsi	9,043.8	1,704.0	(2.4)	(7.4)	(0.4)	(1.2)	2,065.0	Jul 25	6
Tata Technologies +	12,125.2	1,532.7	(4.4)	(5.4)	(5.7)	(18.9)	2,012.5	Jul 25	6
TCS +	646,618.8	121,931.8	3.3	1.3	0.3	(0.3)	172,264.7	Jul 25	16
Tech Mahindra +	133,898.7	12,065.3	3.0	41.7	0.0	3.4	19,452.7	Jul 25	17
Wipro +	220,506.8	32,617.5	0.4	8.6	(2.0)	(8.6)	44,320.4	Jul 25	17
Total	1,984,114.7	312,468.1	5.6	5.3	0.7	(1.7)

 

Notes:
+ Consolidated Figure
* Net interest Income
Y-o-Y: Year-on-Year
# Net premium income
Q-o-Q: Quarter-on-Quarter
N.A.: Not Available
 
Estimates from:
Anand Rathi Share and Stock Brokers Ltd., Antique Stock Broking Ltd., Centrum Broking Ltd., Dolat Capital Market Pvt. Ltd., Elara Securities (India) Pvt. Ltd., Emkay Global Financial Services Ltd., HDFC Securities Ltd., HSBC Global Research, ICICI Securities Ltd., IIFL Capital Services Ltd., JM Financial Institutional Securities Pvt. Ltd., Kotak Institutional Equities, Motilal Oswal Financial Services Ltd., Nirmal Bang Equities Pvt. Ltd., Nomura Equity Research, Nuvama Wealth Management Ltd., Prabhudas Lilladher Pvt. Ltd., Sharekhan Ltd., Systematix Shares and Stocks (India) Ltd., and YES Securities (India) Ltd.   End

 

US$1 = INR 86.15

Compiled by Shivaji Jagatap

Edited by Tanima Banerjee

 

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