At operating level, the earnings before interest and tax and margin could be stable for the quarter due to rupee weakness and lower travel expenses.
Infosys, the country's second-largest IT company, is likely to report around 5 percent sequential decline in Q4 FY20 profit due to lower other income and absence of tax benefits.
December 2019 quarter had non-recurring benefit of Rs 242 crore on income tax refund.
According to brokerages, revenue growth in rupee terms could be in the range of 1.5-1.7 percent QoQ for the quarter ended March 2020 largely due to depreciation in the rupee against the US dollar, while there could be marginal growth in constant currency revenue, but dollar revenue growth is expected to be muted.
"We expect revenues to grow 0.2 percent QoQ in constant currency terms (presuming 1 percent hit due to COVID-19). With cross-currency acting as a headwind of 30 bps, USD revenue may witness a marginal dip of 0.1 percent QoQ while dollar appreciation would lead to rupee revenue growth of 1.7 percent QoQ," ICICI Direct said.
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Kotak Institutional Equities also baked in a 1 percent hit to its estimates from missed billings and lockdowns in India and developed markets in the last two weeks of March 2020. "Without the COVID-19 hit, its revenue growth assumption would have been 1.5 percent QoQ in constant currency.
At operating level, the earnings before interest and tax and margin could be stable for the quarter due to rupee weakness and lower travel expenses.
"EBIT margin to remain stable on a QoQ basis despite lower billing and utilisation decline owing to COVID-19 outbreak, led by rupee depreciation, lower travel expenses and lower variable compensation payments to employees," said Sharekhan which expects 0.3 percent fall in dollar revenue and 5.7 percent decline in profit.
But the key thing to watch out for would be its guidance. Most of the brokerages feel Infosys may not give guidance for FY21 given the lockdown in India and other parts of the world amid COVID-19 crisis.
If it gives revenue and margin forecast then the guidance range could be more than the usual range due to potential COVID-19 impact.
Sharekhan believes Infosys might not provide revenue growth guidance for FY21 owing to macro uncertainties. "If it provides annual revenue and margin guidance for FY21, the guidance range would be higher than its normal range of 2 percent."
Kotak also feels the same.
Like TCS, Infosys is also expected to report strong deal wins for the quarter ended March 2020.
Other key things to watch out for would be the commentary on long term impact from likely slower client discretionary spending; deal win trajectory in wake of travel restrictions and pricing pressure; acquisition philosophy, commentary on COVID-19 impact on service delivery and execution given WFH mandates, travel restrictions and client permissions in critical projects; demand environment outlook across verticals especially BFSI, retail and energy; and opportunity in terms of higher outsourcing activities by clients and prospects of vendor consolidation.
"We do not expect any change to capital allocation policy, nonetheless this will be an area of focus," Kotak said.
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