IT largecap pecking order according to Macquarie — HCLTech, TCS, Infosys, Wipro

India’s top IT services companies have reported strong earnings performance in the December quarter with the demand picture showing resilience but a near-term spending slowdown expected. Ravi Menon, IT and Technology Analyst at Macquarie Group, spoke with CNBC-TV18 about his outlook for the sector.

When it comes to largecap IT companies, Menon believes that the pecking order is as follows — HCLTech, Tata Consultancy Services (TCS), Infosys and Wipro.

IT giant, TCS reported a revenue of Rs 58,229 crore in the third quarter of the current financial year which was higher than the CNBC-TV18 poll. The management has maintained its exit margin guidance for the current financial year at 25 percent, despite the figure marginally missing estimates for the December quarter.

While sharing his outlook for the sector during the current recession, especially in Europe, he pointed out that the current recession is different from the Global Financial Crisis (GFC) of 2008 and that IT companies have significant headroom to improve utilisations, which will drive margin upgrades.

“We are positive on the sector overall. We think that this recession is very different from GFC, we don’t expect spending cuts to happen. We think it will be very minor,” he said.

This compares with estimates of nearly a  percent and typically Wipro should have reported growth numbers in the middle of their guided band but this time the topline growth of 0.6 percent in constant currency terms is at the lower end of their guided band of 0.5 percent to 2 percent.