Recovery pangs

Font Size

Print

Feedback

Email

Discuss

Related Articles

HDFC Bank cuts rates for used carsUnion Bank starts auditing branchesPvt banks pip public peers in NPAsBanks likely to retain home loan rates

: Banking, financial services and insurance (BFSI) industry has always been a harbinger of things to come for tech majors. The largest outsourcer to the $50 billion software services industry, BFSI was the first casualty of the global economic crisis. This vertical is the also the first to bounce back and show a recovery.

Growth registered by most of the top IT companies in the second quarter of the financial year (ending September 30, 2009) came on back of the new deal flow in the BFSI vertical.

India’s top three IT firms—TCS, Infosys Technologies and Wipro (IT services) reported an average increase of 5% in revenues year-on-year and a 3% sequential rise during the second quarter. The managements of these companies confirmed that IT integration work post the mergers and acquisitions in the banking sectorhas led to this volume growth.

As tech majors celebrate the recovery, analysts are already wondering how long will the growth riding on M&A integration work sustain. Moreover, mergers of some of the high-spending banking clients of these companies would mean fewer active clients and therefore lesser business in the long run. We spoke to industry leaders and analysts to do a reality check.

Analysts who track the technology sector feel the sequential and the year-on-year growth registered by TCS in BFSI is the best indicator of the recovery in the sector as among the top players, its share of BFSI to the total revenues is the largest. India’s largest IT firm, which reported revenues of Rs 7,436 crore in Q2, increased the share of BFSI from 43.9% in the first quarter to 45% in the second quarter. The contribution of the vertical to the company’s revenues in the same period last year was 41.9%.