1. Indian IT industry’s growth pangs continues: Kotak

Indian IT industry’s growth pangs continues: Kotak

Industry body Nasscom guided for FY2018E IT services export growth of 7-8% in constant currency, slower than 8.6% in FY2017. Most tier 1 IT companies grew at a slower pace than the industry in FY2017, a trend that does not seem will reverse anytime soon.

By: | Published: June 29, 2017 4:32 AM
Indian IT industry, Indian IT industry growth, IT industry, Nasscom, IT companies, IT companies in india, Nasscom’s guidance, Infosys, Wipro, TCS, HCLT Nasscom’s guidance is based on broad feedback loop from companies and captives. (Image: PTI)

Industry body Nasscom guided for FY2018E IT services export growth of 7-8% in constant currency, slower than 8.6% in FY2017. Most tier 1 IT companies grew at a slower pace than the industry in FY2017, a trend that does not seem will reverse anytime soon. Broader industry headwinds remain. Companies which invested in digital will eventually benefit but after suffering the immediate pain of correction of business mix that is weighed towards slowing traditional service. Nasscom’s guidance is based on broad feedback loop from companies and captives. It cut FY2017 guidance to 8-10% in Nov 2016, from 10-12% at the beginning of the previous year. The growth in industry exports has been at the mid-point or lower end of Nasscom’s guidance for five years prior to FY2017.

Note that Nasscom’s growth assessment could also include some inorganic elements. From an absolute revenue standpoint, the Indian IT has been adding $10-11 billion of revenues every year on constant currency basis, something which will moderate in FY2018. It is clear that the days for Big 4s, Infosys, Wipro, TCS and HCLT combined growth outperformance as compared to industry exports growth will get difficult. We attribute this to a few factors— client captives are growing faster with several big names in financial services and retail expanding captive centers aggressively, India operations of global vendors have been growing faster. Accenture had power packed growth in India and smaller digital focused players and startups are also contributing on the margin.

Indian IT’s growth pangs continues spurred by a combination of slow pace of deal closures, continuing captive shift, lack of the much anticipated kicker to financial services spending and share gain by consulting firms in digital spending. These factors will impact FY2018E industry growth.

You might also want to see this:

Growth is likely to remain modest till such time contribution from digital increases to reasonable portion of overall revenues. Nasscom indicates that digital revenues will be between 15-20% of industry export revenues. Recovery in any case will be uneven, with companies which invested in digital services will have revival in growth rates in future. We forecast organic constant currency revenue growth rate between 4-8.5% for tier 1 companies in our coverage universe.

  1. No Comments.

Go to Top