Are mid-tier IT companies bracing for margin volatility: HSBC highlights 3 key concerns

The first quarter earnings season has triggered sharp stock corrections for most of the mid-tier Indian IT companies and has turned out to be a reality check for them. HSBC has flagged margin volatility, capital intensity, and weak cash flow conversion as growing areas of concern.

Even so, according to a report by HSBC, mid-tier IT offers higher growth potential compared to top-tier companies, on the back of factors like size advantage, relationship with upstream software vendors, margin arbitrage, and aggressive management incentives.