HomeBUSINESSAfter a bumper Q3 by IT firms, the best is over for...

After a bumper Q3 by IT firms, the best is over for margins

After the Q3 explosion by IT firms, the good is gone for the magazines

Management of top IT service providers see the cost of travel going backwards as business conditions become more and more prevalent. Some companies want to reverse wage cuts in the March quarter

Indian information technology (IT) service companies reported higher revenue performance in the December quarter. Firms have seen strong successive cash growth. A prominent feature of the results has been the performance limit for most quarters. The level of use, the increase in mixing with the sea and the steps to continue to make costs are the main factors.

Consequently, IT firms saw their jeans expand in the 50-150 (bps) basic points range last quarter. One basic point is one hundred percent point. Review by Jefferies India Pvt. Ltd has shown that the combined marks of the top five IT firms have increased from 95 bps quarter-on-quarter (q -q) to 24%, the highest figure in the past five years.

However, duplication of Q3’s stellar margin performance seems unlikely. That’s because a strong contract pipeline will keep a strong demand, thus speeding up the hiring speed here.

After a bumper Q3 by IT firms, the best is over for margins
After a bumper Q3 by IT firms, the best is over for margins

Analysts at Kotak Institutional Equities ’said the December quarter limit represents a high rate and will decline in future residences. “Companies are tired of using the lever and will have to hire harshly to meet demand. Cost benefits such as lower sales and marketing and the postponement of salary reviews will end over time. We expect the Ebit limit to drop by 50-200 bps from 3QFY21 levels, “said the local retailer in a report on February 2. Ebit is pre-interest and interest rates.

Consistently, Jefferies analysts said the increase in 3Q reduction costs could be a precursor to higher labor costs in future areas as employment. “At FY22, we estimate that the combined gaps will stand at 22.9% (+ 10bps year-on-year) as the impact of spending will be deducted from rental, rising travel / service costs, marketing costs and high-cost transition costs,” Jefferies said in a February 2 report.

It should be noted that during the Covid era, limited growth in the Indian IT sector was driven by various cost-saving measures. The reduction in business travel alone is estimated to reduce costs by 150 bps of the sector. “Travel costs have been a major limitation during the epidemic, especially for drivers from 4QFY20-1QFY21. Travel expenses were ~ 3% of revenue, down from 0.7% to FY21E (-71% y-o-y), “HDFC Securities Ltd said in a January 29 report.

However, managers of top IT service providers see the cost of travel going backwards as business conditions become more and more prevalent. Some companies want to reverse wage cuts in the March quarter. In the meantime, analysts rejoice in the prospect of sector growth behind the pipeline agreement. That is to say, timely adjustments and closure deals may be worth pursuing.

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