Weak rupee helps IT cos beat visa issues

Mumbai: The domestic IT sector has managed to report improvement in earnings growth and outlook despite visa-related issues and wage hikes as sharp depreciation in rupee along with operational efficiency and deal wins helped it to offset some of the challenges in the quarter ended June 2018.

“The impact of wage hikes, visa expenses and investments was abated by both rupee depreciation and an improvement in operational efficiencies. Continued support from currency, combined with a relatively sanguine start to the year, lead to continued expectations of margin expansion for the year,” said analysts at Motilal Oswal Securities.  

According to experts, this is the third consecutive quarter of organic growth in constant currency terms after having hit a bottom in Q2FY18 with BFSI segment, which had remained subdued for a long time starting to see momentum building up. While US growth continued to linger in mid single digits, Europe was the key driver clocking 17 per cent YoY growth.

“The tone got brighter for TCS, which reported 4.1 per cent year on year (YoY) constant currency growth as against a flattish performance in Q4FY18. The outlook got further cemented by the fact that the BFSI segment accounted for the highest contribution in total deal wins, with a total contract value of $1.6 billion. While Infosy’s BFSI was weak, deal wins have been robust, with it contributing 40 per cent of the total contract value won in the quarter. Cognizant Technology Solutions too, alluded to the sight of return of growth in some large accounts, aided by a more favourable digital mix, to add to the already robust sub-segments of Insurance and mid-tier banks,” Motilal Oswal Securities added.