Accenture: Strong Growth Momentum Continues

Accenture which posted its quarterly numbers continues to see strong growth momentum, Emkay Global has said in a report.

Revenue growth for Q3FY21 was broad based, with 11 out of 13 industries seeing double-digit growth, the firm has noted.

"FY21 revenue growth is driven by traction in organic revenue growth as the company continues to expect M&A to contribute ~2.5% to revenue growth in FY21. The company announced 39 acquisitions in FY21YTD split across North America - 10, Europe - 17 and growth markets - 12. It plans to invest at least USD4bn in strategic acquisitions in FY21 (earlier ~USD2bn) and intends to spend another USD4bn in FY22.

Accenture announced two >USD1bn acquisitions (Novetta and Umlaut) during the quarter. It expects acquisitions to contribute ~4% to revenue growth in FY22. Accenture signed deals worth over USD100mn with record 20 clients in Q3 (54 FYTD'21). Despite solid large-deal intake during last two quarters, the deal pipeline remains strong. Accenture promoted a record 117,000 employees, including 1,200 managing directors, so far in FY21. It expects modest expansion in operating margins to continue in FY22 despite the war for talent and higher amortization charges," Emkay Global has said.

Read-through for Indian IT peers

Accenture's strong Q3 performance and further upward revision in FY21 revenue growth guidance (from 2-5% in early FY21; 4-6% at Q1-end and 6.5-8.5% at Q2-end) reflect strong demand., according to Emkay Global.

"A broad-based demand uptick and sustained growth momentum in revenue/order booking of the outsourcing business augur well for Indian IT peers. Though attrition has inched up across the sector, it is still lower than the peak seen in the past. The Nifty IT index rose ~13%/~21%/~99% in last 3M/6M/12M vs. ~9%/15%/53% of the Nifty index. We believe that strong demand environment, sustained acceleration in revenue growth and robust order booking will support higher valuations. We prefer Infosys, HCL Tech and Tech Mahindra among Tier-1 names," the brokerage has said.