Indian tech companies are looking at a slowdown in FY 13, according to analysts.
When Infosys announced its guidance for FY 13, on the back of some clients backing off from projects, the industry felt that it was a company-specific issue and might not reflect the sector as a whole.
Cognizant guidance
Cognizant, which was the last to report earnings, had a similar story to tell and cut its calendar year 2012 guidance to 20 per cent growth from 23 per cent citing slower-than-anticipated pick-up in demand in the banking and healthcare verticals.
While TCS does not give guidance, it maintained a cautious stance saying that IT spends in large banks in the US still remains hazy. Wipro did not provide a full-year guidance but said that for the first quarter of FY 13, the company expects flat growth.
HCL Technologies, on the other hand, said that it had bagged a huge order though it may not see such good times going ahead.
“Our expectation of better-than-earlier-anticipated FY13 earnings, which was on the back of Nasscom's guidance and encouraging US macro data, stands challenged by the turn of events in the fourth quarter of FY12,” said Mr Ashish Chopra, IT Analyst with Motilal Oswal. Others share a similar view.
“Cognizant management's comments on a slower-than-anticipated pick-up in IT spend in the last quarter coupled with a deceleration in revenue growth when viewed along with its peers points to a sector slowdown,” according to Mr Pankaj Kapoor and Mr Apoorva Oza, IT analysts with Standard Chartered Securities, India. Analysts point out that the anaemic growth in the last quarter could largely be attributed to weak deal flow, delay in the project ramp-ups and seasonality issues like holidays.
“Slow ramp-up of the projects was a negative surprise that resulted in below-expectation performance for top IT companies and we are not anticipating any accelerated recovery in the project ramp-ups,” said Mr Shashi Bhusan, Senior Research Analyst-Institutional Equities, Prabhudas Lilladher. This slowdown has again raised the issue of business models of Indian IT companies.
Offshoring
“While the lure for offshoring is still strong, companies need to get more out of their existing clients in new technology areas like cloud and mobility,” said Mr Sanjoy Sen, senior director at Deloitte India. Despite the slowdown, 18 per cent of CIOs in the US favour Indian outsourcers this year, according to a recent Barclays report.