Modest revenue, weak margin likely for Infosys & Wipro in Q1FY23

After a quiet stage set by TCS and HCL Tech in Q1, Wipro and Infosys are next in line to report their June quarter 2022 results on Wednesday, July 20 and Sunday, July 24, respectively.

The IT industry continues to battle unprecedented levels of attrition, which climbed 19.7 per cent year-on-year at TCS. At HCL Technologies, attrition rate grew at 23.8 per cent YoY in Q1FY23.

Analysts believe employee exits would be within a similar range for Wipro and Infosys on the back of supply-side pressures like wage inflation, travel costs and seasonality.

This would lead to Ebit margin contraction in the range of 50 to 70 basis points quarter-on-quarter to 16 per cent for Wipro, and 21 per cent for Infosys.

Speaking to Business Standard, Ashis Das, IT analyst, Sharekhan by BNP Paribas say ebit margin for Infosys and Wipro to drop 50-70 bps QoQ. Rupee depreciation to offset margin headwinds and strong deal momentum will stay, he says. Macro impact, margin outlook to be tracked. 

That said, modest revenue growth is expected to offset margin pressure due to strong deal pipeline.

Omkar Tanksale, Senior Research Analyst, Axis Securities says Infosys may report revenue growth of 5.2% QoQ and margin is likely to remain a pain-point for Wipro, Infosys. Wipro is likely to report 3.5% revenue growth QoQ. Factors to watch out would be attrition and demand outlook, he says.

These pressure points have also been captured in the stock prices as well.

So far in the calendar year, shares of Infosys, Wipro, TCS and HCL Technologies have shed up to 43 per cent.

In comparison, benchmark indices Nifty50 and the S&P BSE Sensex have bled around 6 per cent, each.

As regards today, FII flows, global sentiments, crude oil prices and rupee movement will guide markets. Besides, HUL, HDFC Life, Ambuja Cements, ICICI Lombard, AU Small Finance Bank will report their June results.