Meltdown and the spiral effect

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: Until now, the banking, financial services & insurance (BFSI) vertical was seen as the prover-bial pot of gold for the Indian IT industry. With 30-40% of Indian IT services revenues emanating from the lucrative vertical, bellwethers in the tech industry ruled the roost.

That was then. As the magnitude of the global economic meltdown becomes clearer with each passing day, it is becoming evident that the BFSI vertical could well become the biggest casualty. And the likes of Tata Consultancy Services (TCS) or Infosys stand most exposed to uncertainties in the market. TCS gets around 43% of its revenues from BFSI, while the percentage for Infosys is at 33%.

Spillover of the negative sentiment does not stop at the BFSI vertical alone. Impact of the slowdown could percolate to other verticals as well.

While so far, these managed to remain insulated from the economic turmoil, the cracks in the wall have started becoming clearer now. S Gopalakrishnan, chief executive officer of Infosys says that this slowdown will have an impact on all the verticals, except for the government sector. “We are into retail, manufacturing, hi-tech etc. The impact in all these sectors is major,” he says.

“The problem is not really peculiar to the BFSI sector; it is radiating to everything else. But the centre of attention is really the BFSI,” agrees Hari T, global marketing officer, Satyam Computer Services.

For the record, manufacturing, telecom and retail are the biggest verticals (in revenue terms after BFSI) for the Indian IT industry. Alarm bells are ringing in industry circles as these verticals have started showing worrisome signs.

The BFSI sector is the largest revenue contributor of the Indian IT industry with roughly 40% share. The top five Indian

IT companies—TCS, Infosys, Wipro, Satyam and HCL Technologies (in that order) get around 30% of their revenues from BFSI. Manufacturing and telecom are the next big verticals for the top five companies with around 20.5% and 17%, respectively coming from these verticals.

Though it is difficult to quantify the impact, the next year is expected to bring some clarity. “The signs have just started coming in the October-December quarter. The January-March quarter is being said to be the toughest as the crisis will go up by a few notches. That is when the real picture will come into being,” says Navin Agrawal, executive director, KPMG.