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MOSL: TECHNOLOGY 1QFY18 PREVIEW-Falling short of the hoped-for traction-Anticipated BFSI-led acceleration may have to wait

​Technology 1QFY18 PREVIEW: Falling short of the hoped-for traction; Anticipated BFSI-led acceleration may have to wait

Crucial 1Q may not demonstrate requisite momentum…

The industry’s structural transformation continuum aside, 1QFY18 is a crucial quarter, given the importance it holds in determining the potential acceleration in FY18 growth. This was expected on the backdrop of positive BFSI undertones at the beginning of the fiscal, thanks much to the anticipated deregulation and the tax rate reforms in the US. One quarter down, and no notable actions towards that end, our conversations with multiple companies indicate that this has not played out as hoped. Any recovery in YoY growth momentum may now have been pushed at least to 2QFY18.

…driving some caution in our YoY CC revenue growth for 1QFY18

We expect YoY CC revenue growth of 2.2% to 12.9% across the top-tier IT and 0% to 17% across our tier-II IT universe. We see growth: [1] maintaining status quo compared to 4QFY17 at TCS (6.5% YoY CC) and INFO (5.7% YoY CC), [2] aided by acquisitions at HCLT (12.9% YoY CC), [3] marred by Healthcare vertical prospects at WPRO (2.2% YoY CC), and [4] deteriorating at TECHM (5% YoY CC) amid interim pressures in both Communications as well as the Enterprise segment.

Cross-currency tailwind to offer some respite to dollar growth…

With GBP and EUR appreciating 3.6% QoQ and 5.1% QoQ against the USD respectively, we see 80-120bp tailwind in reported QoQ dollar revenue growth. TCS, HCLT and WPRO should be bigger beneficiaries of the movements, compared to INFO and TECHM.