The three-month period stretching from July to September has traditionally been the strongest quarter for the Indian IT services industry when companies by and large report strong performances on all counts. It is a different situation this time around though. The September quarter is expected to have very divergent voices from the top four of the Indian IT services industry—TCS, Infosys, Wipro and HCL Technologies—going by their responses to the ongoing economic crisis in key markets.
During the June quarter, TCS and HCL Technologies reported numbers which outperformed the market but the same was not the case with Infosys and Wipro. In fact, Infosys discontinued its long held practice of giving out quarterly revenue guidance citing market volatility. Sudin Apte, CEO, Offshore Insight, an IT advisory firm said, “I don’t have a very pessimist view. Though the market is tough with delay in decision making, we are not expecting anybody grow substantially this quarter. However, the early signs is that the mood is getting a little better at least in the US but it is yet to been seen how much will translate in dollar signings.”
The $100 billion Indian IT industry, of which $70 billion constitutes exports has been struggling for growth over the last two-three years. The sector has been experimenting with new strategies and business models to find a way out of the current crisis, but no clear cut path has been found yet.
Though for now the US economy is showing some sense of normalcy there are still certain overhang which could cloud the prospects of the Indian IT industry. The recent measure by US Federal Reserve on quantitative easing (QE) of infusing further liquidity into the economy could increase the confidence levels of US corporates and having an indirect impact for IT companies but these are very early signs.
On the prospects of second quarter results, Dipen Shah, head—private client group research, Kotak Securities, “We expect companies under our coverage to report a sequential revenue growth of about 4% driven by volumes and depreciation in rupee. Volumes for the top 4 companies are expected to rise by 2-4%. This will be relatively muted for a quarter which is considered to be best for the Indian IT companies.”
There are multiple factors which are contributing towards the muted growth of the sector: the Indian IT industry which is dependent on the discretionary spends has not seen any kind of