Accenture results mixed bag for Indian IT firms

Seasonal strength, overall positive demand outlook, falling rupee signal towards a strong Q2

Global IT consulting and services firm Accenture’s fourth quarter numbers have sent mixed signal on the demand environment. 

 

Accenture reported new bookings of $33.3 billion for the year and revenue of $28.6 billion an increase of 4%. For the fourth quarter the company reported revenue of $7.1 billion. Importantly, the company’s consulting revenue at $3.8 billion registered growth of 2% in US dollars and outsourcing revenue continued to grow and raked in $3.3 billion in revenue a growth of 6%. 

 

“Management indicated a good expansion in the pipeline over the last 90 days. Bookings data suggests that while decisions are being taken (should help Indian IT Services as well), there continue to be pockets (like ERP) that are yet to see a recovery – trends need to be monitored,” said Surendra Goyal and Rishi Iyer of Citi Research in their note post Accenture’s reports.

 

Accenture’s numbers show good demand for run-the business kind of work. This could be good news for Infosys which has stated that it will also focus on its bread-and-butter business.

 

Though the fourth quarter numbers indicate good business demand the same was not reflected in Accenture’s guidance, which indicates that uncertainty continues. The company has guided its FY14 bookings to be flatish versus 2013. The reason for this is primarily its consulting business is yet to see a continues growth trend.

 

Analyst also point out that other than the positive numbers of Accenture, Indian IT services will see a better second quarter (July-September) due to demand in overall demand, seasonal strength and a falling rupee. 

 

“The demand environment has been improving for most of the companies, as seen by recent trends. The September quarter is usually a slightly stronger seasonal quarter as well. Consequently, revenue growth should be strong,” said Anantha Narayan and Sagar Rastogi of Credit Suisse Equity Research. A falling rupee will also mean positive impact on margins, which are expected to see positive flow of 200-300 basis points.

 

However, a weak rupee and Australian Dollar will mean adverse impact of 50-100 basis points on revenue growth.