India’s HCL Technologies, Tech Mahindra Lift Veil on IT Industry Outlook | Company Business News

(Bloomberg) — Indian software leaders HCL Technologies Ltd. and Tech Mahindra Ltd. will offer more insights into IT services sector’s future when they report earnings this week after bigger rival Tata Consultancy Services Ltd. posted a fall in first-quarter sales on cautious client spending.

Quarterly sales across India’s computer services and IT firms are projected to have slid 0.6% sequentially, Jefferies analysts Akshat Agarwal and Ayush Bansal said in a note previewing the sector.

Softer seasonal performance is seen as the main drag on earnings, though could be partly offset by US dollar depreciation boosting firms like HCL Technologies, Tech Mahindra, and Coforge Ltd., which have a higher exposure to Europe. 

On Thursday, Tata Consultancy Services Ltd. reported a 3% annual decline in sales for the first quarter through June on a constant currency basis as clients were cautious on technology spending due to global trade and geopolitical uncertainties. This also signals it’s doubtful that tech services industry will recover this year from deteriorating spending.

Looking ahead, deals are likely to continue at a steady pace as clients keep looking at software solutions to optimize operations, Jefferies said, though noting that discretionary IT spending remains under pressure. 

Meanwhile, Taiwan Semiconductor Manufacturing Co.’s US expansion plans will be in focus after the Senate passed a tax bill that would make it cheaper for chipmakers to build plants there. TSMC will be eligible for an investment tax credit of 35% if it breaks ground on new plants before a 2026 deadline.

TSMC on Thursday reported June quarter sales rose a better-than-anticipated 39% helped by an AI spending boom. 

Highlights to look out for:

Monday: HCL Technologies (HCLT IN) may show better growth than its peers, aided by its research & development and engineering divisions. The company said last quarter that it was seeing efficiency gains from AI, and hiring may not grow in line with revenue. HSBC Global Research said the company is unlikely to revise its annual revenue growth forecast of 2%-5%, which is higher than the projections made by rival IT firms. 

Tuesday: No major earnings of note.

Wednesday: Tech Mahindra’s (TECHM IN) first-quarter net income likely rose 41%, the slowest pace in three quarters. Key areas to watch include the company’s measures to improve its margins to 15% by fiscal year 2027 and its turnaround efforts to boost revenue, according to Kotak Institutional Equities.

Thursday: Axis Bank’s (AXSB IN) net interest margin should decline from a quarter ago, reflecting the impact of the Indian central bank’s interest rate cuts. The country’s banks in general are likely to sustain their control on operating expenditures and are seen reporting strong treasury gains, according to analysts from ICICI Securities.

Friday: JSW Steel’s (JSTL IN) first-quarter net income almost tripled, consensus shows. Price pressures linked to weaker China steel demand and US tariffs could be offset by robust demand on domestic consumption and government capex, lower coal costs and a 12% temporary safeguard duty on some imports, BI said.

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–With assistance from Pradeep Kurup and Cindy Wang.

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