The financial results of peer IT firms are unlikely to mimic the worse-than-expected fourth quarter earnings of Infosys, once the IT bellwether. The Bangalore-based company had fallen out of favour sometime back.
“Infosys is no longer the poster boy of Indian IT sector. Other IT companies are doing well, and Infosys results are no longer a pointer,” said Jagannadham Thunuguntla, equity head at brokerage firm SMC Capitals.
At present, Infosys is the third largest IT company in revenue terms, with Cognizant Technology Solutions in the second slot after TCS. For the past 9-10 quarters, the country’s largest software exporter Tata Consultancy Services had been performing better than the Bangalore-based software major.
“Infosys may no longer be the barometer for the Indian IT industry going forward as the company’s issues are internal and not a reflection of the global trends,” said Alok Shende founder-director with Ascentius Consulting, adding the company may take at least two years to post the line of growth enjoyed by its peers.
TCS, HCL Tech and Cognizant have been outperforming the industry, while Infosys lags. If this were “truly an industry issue”, a huge disparity in performance would not happen as frontline IT companies mostly service the same top 20 clients, Shende said.
INDUSTRY EXPECTATIONS
Nasscom is expecting the industry to grow by at least 8-10 per cent, but Infosys has been growing lower than the projections, since the last two years. Infosys always provides a lower growth outlook, but outperforms it.
On Friday, Infosys shares plunged 21 per cent, which rubbed on to other IT stocks such as TCS, HCL Tech and Wipro during the early hours of trading.
“Overall the industry will grow as per Nasscom projections (12-14 per cent). Mid and small companies would have a tough time. They have to become specialists as they have to compete with big companies. Overall, the maximum number of businesses will continue to come from BFSI and manufacturing,” said Daljeet S Kohli, Head of Research at IndiaNivesh.
But there were others who have a different view.
Infosys guidance range indicates that the demand for IT services remains volatile. “We believe that demand will pick up later in the year,” said Rumit Dugar, IT and Telecoms analyst, Religare Institutional Research.
“Infosys results signal an inflection point for the company as well as the overall Indian IT services industry,” said Bryan Belanger, analyst with the US-based Technology Business Research.
A couple of analysts have decided to take a wait and watch approach, and declined to comment. That is at least till other companies announce their results.
(With inputs from Adith Charlie in Mumbai, Ronendra Singh in New Delhi, Venkatesh Ganesh in Bangalore and T.E. Raja Simhan in Chennai.)