The results of top-tier companies TCS and Infosys have tripped on global uncertainties and missed street estimates, setting a subdued tone for Q4 show by the IT pack, and experts see choppy 1-2 quarters for the industry but are hopeful of subsequent recovery.
The earnings’ season started on a sombre note with the Q4 scorecards that fell short of expectations, but more importantly the management commentary of India’s top two IT services companies was punctuated with words of caution about prevailing customer sentiments across BFSI, technology services and certain other verticals, particularly in the US.
While Infosys top brass spoke of “unplanned project ramp downs and decision making delays by some customers”, Tata Consultancy Services (TCS) talked of some clients deferring newer, non-critical initiatives.
Industry veteran and former Infosys director T V Mohandas Pai says Q4FY23 will be subdued for IT players but that extent and impact will depend on profile and strategy of individual companies.
He sees “a cautious Q1FY24 with some hope of growth coming back in Q2 of this year”.
Pai believes uncertainties in the US market is likely to come down in April-June quarter, and that new work will take 1-2 quarters to come by, so “October-November will be better time”.
Given that the Indian IT industry is a major force in the global tech arena in terms of its size, scale and strength, it will reflect realities of the market, he contends.
“Five years back, the Indian IT companies were much smaller, they were samples and not the universe…now they have become the universe,” Pai told PTI. The industry is today a greater force with USD 200 billion of exports, and the top 5 Indian IT companies are big players in the global market.
“Whatever happens in the market will impact them…They will reflect how the spending is in the economy because they have huge set of clients and the clients reflect spending in the IT universe,” Pai said.
ICRIER Chairperson and Genpact founder Pramod Bhasin asserted that while the “softness” in earnings from the big IT firms is likely to continue for a few quarters, growth will return thereafter.
“The softness in earnings from the big IT firms is likely to continue for a few quarters more as many industries, specially tech, restructure and cut costs quite dramatically. In recent years, the tech industry has been a huge consumer of IT services as well as outsourcing. Some of that will, and has definitely slowed down,” Bhasin pointed out.
