IT bellwethers Infosys and TCS and mid-tier companies such as MindTree and Hexaware are likely to beat street forecasts, in spite of the uncertain macro-economic environment. Analysts at Kotak Institutional Equities research said offshore IT companies can beat the Street’s low double-digit growth forecasts.

“The macro environment remains uncertain and challenging. Memories of a couple of bad revenue growth quarters for Indian IT services firms after the Lehman crisis are still fresh,” the Kotak analysts said, adding that there was less possibility of seeing such a sharp slowdown in revenue growth.

Few IT industry leaders have previously said that banking, financial services and insurance (BFSI) verticals would slow down or be flat in the next quarter due to the ongoing crisis in the euro zone. BFSI contributes about 20 to 30 per cent of revenue for many of the top IT companies.

The report said there was no such strong correlation linking the global macro slowdown to companies’ IT spends and IT outsourcing. The report said IT offshoring growth story is about gaining market share within existing IT spends. It does not depend much on growth in overall IT spend.

The report cited several instances where IT companies have performed beyond market’s expectations. It said the form 8-K filing by Cognizant with the Security Exchange Commission of the US, mentioned about setting up the 100 per cent variable company’s target for senior management at ‘at least 23 per cent’ of dollar revenue growth for 2012 estimated.

“We believe Cognizant would have built in ample cushion to account for potential macro-driven pricing pressure as well as adverse cross-currency movements. Volume growth assumption built into the 8-K revenue targets is likely higher. We also note that Cognizant refrained from setting current year 2009 performance targets for the management in current year 2008 – clearly suggesting that the clichéd ‘this time is different’ may be true as far as comparing the current scenario to the post-Lehman one is concerned”, read the report.

Another instance, which it mentioned, was about strong November 2011 earnings report from Accenture. “Revenue momentum sustained, bookings were strong (outsourcing bookings were up 40 per cent YoY), the company reiterated its year-ending Aug 2012 revenue guidance, and hiring numbers were robust”, read the report.

Source:http://www.mydigitalfc.com/news/infy-tcs-likely-beat-forecasts-649