Infosys To HCLTech: A Look At IT Sector's Q2 Dividends, Deal Wins, And Revenue
Infosys raised its fiscal 2025 revenue guidance following a revival in the BFSI sector, while HCLTech upgraded its outlook for the year despite cautious client spending across IT services.
Second quarter results of the Indian information technology sector were a mixed bag. But they showed that the previously stressed BFSI sector is seeing signs of revival, with the sector boosting revenues for top players. Infosys even raised its revenue guidance for fiscal 2025, saying there was good momentum in financial services.
The top five IT companies—Tata Consultancy Services Ltd., Infosys Ltd., HCLTech Ltd., Wipro Ltd., LTIMindtree Ltd. and Tech Mahindra Ltd.—have announced their second quarter results. While the sector may seem to have bottomed out, management is still saying that clients are cautious on discretionary spending.
Where does this leave investors in the sector?
Here is a review of Indian IT's overall performance in the quarter ended Sept. 30, 2024.
Guidance
Of the top five players, only Infosys and HCLTech gave quantitative yearly guidance, while Wipro gave quarterly guidance.
Infosys upgraded its fiscal 2025 constant currency revenue growth guidance to 3.75-4.5%, up from its earlier projection of 3-4%. However, the midpoint of this guided range implies a flat growth for fiscal 2025 and the street was already baking in this kind of guidance upgrade. Hence, a fall in the share price after the results was not a surprise.
HCLTech upgraded its revenue growth guidance to between 3.5 and 5.0% YoY in constant currency terms, versus the previous guidance of 3-5%.
Wipro guided for -2% to 0% QoQ revenue growth in constant currency terms for the third quarter, which is below expectations.
Banking, Financial Services and Insurance
Most IT companies' revenues were boosted by the BFSI space. Management of most IT companies also mentioned the revival of demand in the sector. In the second quarter, only HCLTech reported a decline, while TCS reported flat growth in the space, with all others reporting healthy growth.
Hiring
Cumulatively, the top five IT companies added around 17,500 employees in the July-September quarter, with only HCLTech reporting a net decline in hiring.
The largest hiring was done by TCS, which added around 5,700 employees during the quarter. Though HCLTech reported a net decline in hiring, the management mentioned that it added 2,932 freshers this quarter.
Attrition largely stabilised, with average attrition for the five companies standing at 13%.
Payout To Shareholders
Most IT companies have declared interim dividends for the quarter ended Sept. 30, 2024, with Infosys leading the pack at Rs 21 per share. Wipro has declared a bonus in the ratio of 1:1, which was likely why the stock gained the day after the results.
Total Contract Value Of Deal Wins
Deal wins were a mixed bag for IT this quarter, with Wipro reporting the most healthy growth, both on a quarter-on-quarter and on a year-on-year basis. Infosys reported a decline in large deals on both QoQ and YoY basis.
