IT caught in slowdown web

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Mumbai: if companies come out with short term budgeting and delay new projects further, then in the next year, growth will be even slower for the entire industry. However, the intensity of impact will be clearer by early next year, when the budgeting will be over,” commented Natarajan.

However, the analyst feels that FY10 will see a much slower growth rate in revenue in rupee terms compared to FY09 if the top five Indian IT companies are considered.

“In FY09, we have seen revenue growth of 30%-35% in rupee term as far as the top IT companies is concerned. However, due to the current market situation, in FY10 the revenue growth of these companies in rupee term could be around 10%-12%,” commented the analyst. “There are a few sectors that are badly hit during this time, like the BFSI. Thus, such short term budgeting is likely to happen by companies in such sectors,” commented an IT analyst from a top research firm.

It would be difficult for the Indian companies as experts feel that they would not have a complete and clear vision of the volumes that would come to them. In this situation, companies will have to depend on free cash flows to manage costs and expansion plans. An Edelweiss Securities report states, “Free cash flows of the Indian IT sector accrue with rather little stress. In this aspect, Infosys is at the top, converting about 15% of its revenues into free cash flows in times of expansion. Moreover, as Infosys showed in 2002 and 2003, this can show an uptick, hitting 17-18% of revenues in the current turbulent environment, given cutback in growth capex.”