FE Editorial : ITs back

Written by The Financial Express | Updated: Jan 19 2013, 06:49am hrs
After eight quarters of struggle, the $80 billion IT services industry has turned in a performance that has taken the analyst community by surprise even though Wipro disappointed on Friday. Infosys, TCS and HCL have registered better than expected results while giving out optimistic forecasts, while Wipro could only guide for a 0.5-3% revenue growth in the March quarter. Wipro was also the only company among the top 4 to record a drop in volumes in the December quarter. Of all the earnings declared so far, those of Infosys have been the most refreshing. Not only did it signal a change in trend, it also reversed what seemed an irreversible fall by growing Europe as a region by a whopping 16%. TCS and HCL doing well was expected. While managements of all 4 companies remain cautious, their numbers suggest an improvement in the operating environment. Infosys won 53 new clients during the quarter, of which 13 came from Europe. TCS added 31 new clients and the number of $100-million-plus clients increased to 16 from 14. Not surprisingly, Gartner projects global IT services growing 5.2% in 2013 versus 1.8% in 2012. Growth has been witnessed across verticals, a sign that the environment has not been boosted by only a section of the clientle. Usually, BFSI is the one that helps IT vendors get back on track but this time manufacturing too has played a big role along with energy and healthcare. This is significant and also good news for Indias current account deficit which has suffered with IT exports slowing for several quarters now.

With customers looking to save costs, Indian IT vendors are looking to win more large contractsNokias announcement that it will outsource IT work to HCL and TCS is a case in point. However, Wipros results point to the fact while the environment has improved a bit, earnings will depend on each vendors capabilitiesWipros 1% fall in volume growth is in stark contrast to Infosyss 2% hike, TCSs 1.25% and HCLs 3% increase in volume growth during the quarter. Thats why, while Infosys has risen 2.8% since its results came in a week ago and TCS 1.3% since its results were announced, HCL rose the most at 5.9% while Wipro fell 7.9%.