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IDBI Capital Report
Weak macro, lower discretionary spend and tighter budget to impact revenues of IT companies in Q4 FY24E and beyond. Longer tenured deal led by cost efficiency deals, delayed decision making, slower ramp up in deals and slower deal conversion are key commentary by IT companies.
This commentary cast doubt of a significant recovery in H2 FY25E and overall outlook for FY25E. The only near term trigger is generative AI.
For Q4 FY24E, in terms of large caps we expect dollar revenue growth in the range of -1.3% - +1.5% QoQ and cross currency tailwind of average 36 basis points.
Among mid-caps we expect -1.1 to +2% QoQ growth. In terms of margins, we expect it to improve across companies (except Zensar Technologies Ltd., LTIMindtree Ltd. and HCLTech Ltd.) due to absence of furloughs and higher utilization.
We expect Coforge Ltd., Newgen Software Technologies Ltd. and Birlasoft Ltd. to report healthy numbers. Newgen and Sonata Software Ltd. are our top picks.
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