Q4FY26 IT Sector Report India-Focused plays thrive; Software remains weak

We expect India focused companies to deliver a strong q4, driven by robust demand amid supply constraints. Our dealer checks suggests that demand for PCs and Peripherals continue to be robust. Component prices have continued to be elevated, which should translate into higher ASPs for Q4, albeit we expect demand to be slow in Q1.  Accenture’s results and guidance suggests gradual recovery for IT services with financials leading the way. Netweb is likely to perform well on the back of strong execution of the AI Mission deals and continued momentum in the enterprise segment. Aurionpro should sustain its growth trajectory in the TIG segment; Redington will be impacted by the uncertainty in the Middle East, and we expect overall growth to be hit by 2-3% wiht some negative impact to cashflows. IT services (Indegene Ltd) are expected to report a softer quarter on the back of sluggishness in deal wins and some level of churn in existing clientele.  We continue to be positive on India focused themes (Netweb, Rashi, Aurionpro) as demand continues to be strong, while any positive news on the war front could be a major positive for Redington.

Netweb Technologies

Netweb should post a robust quarter driven by strong organic growth in the AI & HCI segment.  Enterprise demand continues to remain solid. The hikes in component prices are starting to impact demand, impact of which could be seen from Q1.  Margins should be in the 13–14% range, driven by lower contribution from AI mission deals.

Aurionpro Solutions

Aurionpro should continue its strong momentum in Q4 on the back of deal wins in the TIG segment. Key highlights include – Bhopal and Indore metro deal at Rs 1.5 bn,  banking deal for IcashPro for CSB bank, Mumbai metro line 5 PSD deal , IDBI data center deal win, few data center project from leading global player and hyperscaler. The company is expected to sustain its 20%+ growth trajectory, with margins at the lower end of the 20–21% range. Order book should rise to Rs 18 Bn+ on the back of these wins.

Rashi Peripherals

Rashi is expected to deliver another record quarter, supported by strong demand for PCs, desktops, and peripherals. Q4 is a seasonally strong quarter especially on the enterprise side. The price hikes seen in peripherals (RAMs, Storage) should help with higher ASPs.  Margins are likely to remain at the upper band of 2.5–3.0% on the back of higher channel sales. We expect some demand softness from Q1.

Redington

Redington will be impacted by the war situation in middle east (35% revenue). We expect at least 30-40 days of impact across that region. Redington supplies non-discretionary items in ME, which will help soften the blow. Software and cloud should continue its momentum (40%+ YoY growth), while TSG continues to struggle. ESG should continue its double-digit growth. Margins are expected to be flat; Arena losses are expected to narrow.

R Systems

R Systems will be negatively impacted by the war in ME as Novigo’s 50%+ revenue comes from ME (Rs 14 Bn+). Apart from that, we also expect some pressure in the existing clientele as well as sluggishness seen in new deal wins. We expect margins to improve by 30-50 bps as Novigo operates at 20%+ margins. Currency tailwinds will help margins by 20-30 bps.

Saksoft

Saksoft faced challenges in Q3 on the back of reduced/delayed spending by its top 2 clients.  We expect marginal improvement in q4 and a return to normalcy by Q1FY27e. Currency tailwinds will help the company as GBP has appreciated by 8.7% yoy in Q4. Margins are likely to be at the lower  end of 18-19%.

Indegene

Indegene is expected to deliver strong growth on the back of full impact from Biopharm acquisition. Overall growth is expected to be in the mid-teens on a YoY basis. Margins should improve slightly QoQ.

Valuation & Risks

We expect Netweb, Rashi, Indegene and Aurionpro to deliver a strong quarter, while R Systems, Redington and Saksoft will have a soft quarter. Our pecking order will be Rashi Peripherals (strong quarter), Aurionpro Solutions (Attractive valuation), Redington (value buy), Netweb (growth momentum), Saksoft (inexpensive valuations) and Indegene (limited near-term upside).

Click to download the full report on IT - Sector Update

Analyst:

• Vinay Menon - Senior Research Analyst, Institutional Equities (NISM-201600112117)
• Miloni Mehta - Research Associate, Institutional Equities (NISM-201800127664)

Frequently Asked Questions (FAQ)

Which IT segments are performing well in Q4FY26?

India-focused segments like AI, peripherals, and enterprise tech are performing strongly, led by companies such as Netweb, Rashi, and Aurionpro.

Why are software and IT services underperforming?

Global uncertainty, weak deal wins, and client-side spending delays are impacting IT services, resulting in softer growth for companies like R Systems and Saksoft.

What are the key growth drivers for India-focused IT companies?

Enterprise demand, AI adoption, pricing power from component inflation, and government-led digital initiatives are key growth drivers.

What risks should investors monitor in Q4FY26?

Geopolitical tensions in the Middle East, demand slowdown in Q1, and weak global IT spending are key risks affecting performance.

Open your MNCL Demat Account