Bengaluru– Seasonal weakness is likely to keep the growth of the Indian IT industry muted in the fourth quarter (January-March) of 2016-17, said global investment banking firm Jefferies LLC on Monday.

“Cross currency will be favourable on dollar revenue and margins stable,” said the US-based securities firm in a statement from New York ahead of the Indian IT majors declaring their financial results for the quarter (Q4) under review and fiscal 2016-17 this month.

Though the focus of results will be on the revenue outlook for the new fiscal 2017-18, capital allocation (buyback of shares), progress in digital and pricing will also merit attention in view of constructive guidance and commentary from their US listed peers.

“As growth outlook for fiscal 2017-18 will be the focal point of results, we expect Infosys to guide for a 7-9 per cent YoY growth in constant currency (cc) terms,” said Jefferies in the statement.

The city-based global software major will declare its results for Q4 and fiscal 2016-17 on April 13 in this tech hub.

For the fourth quarter (Q4), consolidated revenue growth of Infosys is likely to be 1.2 per cent sequentially, 0.9 per cent in cc and 5.5 per cent YoY.

“Margins will decline 40bps (basis points) sequentially due to rupee depreciation in the quarter (Q4) and higher variable pay-outs over the previous quarter,” it said.

Market has been expecting Infosys to announce a significant buyback and capital allocation strategy, which will be important from its stock price perspective.

In case of bellwether Tata Consultancy Services (TCS), Jefferies estimates 1.5 per cent quarterly or sequential growth in dollar terms, 1.1 per cent in constant currency (cc) and 5.8 per cent YoY.

“The focus of TCS results will be on stable performance, attention on its Chief Executive Officer (CEO) commentary,” pointed out the statement.

Senior executive and former Chief Financial Officer (CFO) Rajesh Gopinathan took over as the new CEO of TCS on February 21 following the appointment of its incumbent N. Chandrasekaran as Chairman of Tata Sons Ltd of the Indian multinational Tata Group.

Margins of the outsourcing firm are expected to be flat sequentially, with operational improvements and cross currency benefits offsetting the negative impact act of rupee appreciation.

“TCS could increase its payout ratio to 50 per cent given its healthy cash generation profile. Commentary on growth outlook for FY2018, order book, growth in digital, pricing trends and impact of potential visa reforms on the business will be critical,” asserted the analyst’s statement.

Software major Wipro will have a slow start to the new fiscal with a 1.8 per cent sequential revenue growth, 1.4 per cent in cc and 3 per cent YoY, in line with its guidance of 1.2 per cent quarter-on-quarter (QoQ) growth.

“Majority of the growth would have been contributed by the integration of its Appirio acquisition. We expect Wipro to guide to a 1-2 per cent QoQ growth for the first quarter (April-June) quarter of new fiscal (FY 2018),” pointed out the statement.

Jefferies expects Wipro’s margins to contract 20 bps sequentially in Q4 owing to rupee appreciation and the integration of Appirio.

“Investors will focus on progress on initiatives taken by the new CEO and improvement in large client profile,” said the statement.

Wipro acquired the US-based the cloud-based consulting firm Appirio for $500 million (Rs.3,350 crore) in October 2016 to consolidate its foothold in cloud transformation services.

Jefferies expects revenue growth of HCL Technologies to be 3.8 per cent QoQ and 14.2 per cent YoY, with most of it coming from its acquisitions during the quarter (Q4) of FY 2017.

“We expect HCL Tech to guide to 10-12 per cent YoY growth, including acquisition/alliances) for FY 2018,” said the statement.

Margins for Q4 will remain flat QoQ with negative impact of rupee depreciation being offset by the incremental contribution from the IP (Intellectual Property) deal with IBM.

Slowdown due to rationalisation and deal termination is expected to the limit Tech Mahindra’s revenue growth in Q4 to 1.1 per cent, 0.4 per cent in cc and 10.2 per cent YoY in rupee terms.

“The company’s telecom business is likely to remain flat QoQ, with core growth and Comviva seasonality being offset by the rationalisation of its ALCC (Lightbridge Communications Corporation) business and the termination of base contract,” said the statement.

Mahindra bought the US-based LCC for $240 million (Rs.1,486 crore) in March 2015 in an all-cash deal to strengthen its presence in the growing telecom and enterprises network market.

The NCR-based company also bought 51 per cent majority stake in mobile- value added services provider Comviva Technologies Ltd of Bharti Group for Rs.260 crore in September 2012.

“Margins of Tech Mahindra could decline 20bps QoQ and take some impairment in its LCC business in Q4,” added the statement.