Software & Services share price target

ER&D spending set for major growth .......................................................................................... 9 ER&D services expand beyond mechanical function..................................................... 10 Manufacturing segment drives spending in outsourcing ............................................ 12 Digital mix cannibalizing legacy ER&D spend .................................................................... 14 Growing intensity of ER&D outsourcing .............................................................................. 15 Indian ESPs to grow faster than GCCs................................................................................. 16 India emerging as a global ER&D service provider .......................................................... 17 Segment-wise India opportunity ....................................................................................... 18...

weakness reported last quarter. Although we believe the tariff-related headwinds are yet to get fully captured into 4Q operations, earlier weakness in selective pockets along with anticipated ramp-down for a few, would impact exit rates for a few IT names (PL coverage universe). Similarly, the softness in revenue growth should make it difficult to pull up margins, while making it even more difficult for companies having residual/partial impact of compensation EUR, GBP and AUD have weakened against USD by 1.4%, 1.8% and 3.7% QoQ,...

Discretionary spending revival could be delayed due to macro uncertainties key markets and geographies will be detrimental to the IT services sector. Until Q3FY25, gradual recovery in demand was visible within certain pockets; however, all this could change quickly with inflationary trade policies further escalating uncertainties among global enterprises, and requiring them to revisit budgetary spends. Discretionary small-size deals are most likely to get Additionally, we believe cost-focused AI programs that have achieved some level of maturity would get infused into large deals and provide some respite to ACVs. We believe the cost + AI theme would playout meaningfully in the...

The demand environment in Q3FY25 reflected early signs of stabilization, with slightly improved Total Contract Value (TCV) momentum, supported by small and mid-sized deal conversions. However, large deal closures remained muted, indicating that enterprises continue to maintain a cautious stance, particularly for discretionary-led digital transformation initiatives.

Accenture's (ACN: NYSE) quarterly performance exceeded the consensus estimates and reported at the top-end of the guidance. However, the outsourcing bookings were disappointing (down 6% YoY), which is again coming at the back of weak bookings reported in Q1 (down 4% YoY), partly risking the odds of achieving organic growth in H2. For the Indian IT Service context, the revenue growth was already a challenge, which might get intensified with muted bookings and delayed deal closures. We believe the weakness in consumer sentiment and inflationary tariffs are yet to get fully...

YoY organic growth is expected to decelerate from ~4.5% in 2QFY25 to 0.5% in 4Q. Implies a US$2.6bn annualized organic revenue loss

The Indian IT sector exhibited a marginal improvement in demand during Q2FY25, reflecting early signs of recovery. However, as the industry enters Q3FY25E, growth is expected to moderate, weighed down by seasonal furloughs and typical calendar year-end softness.

Organic growth raised by 100bps to 2.5% on better 1QFY25 (AUG YE) which in turn was driven by strong large order wins in FY24

Over the past few quarters, Indian IT companies have been grappling with weak discretionary spending, delayed client budgets, and persistent macroeconomic challenges. However, the Q1FY25, earnings backed with management commentary, indicated initial signs of recovery, especially in the BFSI vertical.

1.5% LC organic revenue growth at the midpoint FY25 (YE August) is conservative if the US soft landing plays out.

Our picks from Largecaps: HCL Tech; Infosys Our picks from Midcaps: Persistent Systems; and KPIT Technologies