India’s largest software services company by revenueTata Consultancy Services Ltd (TCS) expects the 2013-14 fiscal to be a better one for software companies than the current fiscal. As for the current fiscal, TCS will meet the revenue growth rate projected by the National Association of Software and Services Companies (Nasscom) lobby group. The outlook is more optimistic than guidance by Infosys Ltd, the No.2 Indian software services company.
“Nasscom has projected a growth of around 11% for fiscal year 2013 and we are sticking to that,” N. Chandrasekaran, managing director and chief executive officer, said on the sidelines of a Nasscom summit in Mumbai on Tuesday. “For manufacturing, telecom and hi-tech companies, the December quarter is furlough, so it will have an impact on growth.”
Growth traditionally slows in the three months to December for most companies with a presence in the US, the largest market for Indian software firms. The US accounts for over 50% of TCS’ total revenue.
“The US is recovering, post-elections. There’ll be a focus on job growth and economic growth. In my mind, it will do better not only as an economy, but (also) in the tech sector,” Chandrasekaran said.
In February, Nasscom had projected a growth of 11-14% in 2012-13 for India’s $100 billion information technology (IT) services industry, 70% of which is generated from exports.
Infosys told analysts last week that a further moderation is likely in its 5% projected growth this fiscal.
Brokerage Emkay Global Financial Services Ltd said in its 6 December report on Infosys that its discussions with the company indicate that a further moderation in FY13 revenue guidance of “at least 5% dollar revenue growth” to $7.3 billion is most likely, given that decision-making on some of the large deals that the company was expected to close has been affected both by natural events such as Hurricane Sandy and associated delays.
TCS will wait before commenting on client budgets.
“We are in December now, the year is ending,” Chandrasekaran said. “We will talk about it in January.”
In its 5 December report on Cognizant Technology Solutions Corp., IDFC Securities Research said, “Global corporates are experiencing uncertainty on the back of slowdown/recession in key European economies and possibility of a slowdown/recession in the US (fiscal cliff in 2013). It is likely to lead to largely flat IT budgets for CY13 with FY14 being another tepid growth for Indian IT sector.”
Last week, Cognizant’s filing to the US regulator Securities and Exchange Commission (SEC) hinting at growth of around 16%—slower than its previous estimate—sent IT stocks in the red.
Most brokerages expect IT stocks to underperform the Sensex, BSE Ltd’s bellwether equity index, in the next fiscal. In past six months the exchange’s IT index has lost 4.03% while the Sensex has gained 22.16%.
On Tuesday, the Sensex was down 0.12% to 19,837 points and the IT index was down 0.71% to 5,554 points.
“I don’t see the stocks of the entire IT sector doing the same. The sector is in a mature phase where certain players like TCS, HCL and Tech Mahindra will do better than the rest like Infosys, Wipro,” said an analyst with a Mumbai-based brokerage, requesting anonymity.
Chandrasekaran of TCS flagged currency as a concern.
“As long as there is no huge volatility between quarters, we are okay, but we need to keep long-term rupee appreciation in mind,” he said.
Hitesh Shah, Indian telecom and technology analyst with IDFC Securities Research, agreed.
“If there is a gradual rupee appreciation, companies can absorb it but if there is sharp appreciation, then it will affect them,” he said. “We are building in some kind of rupee appreciation in our estimates of IT companies for the next one to two years.”
The local currency has been volatile this year. From a level of 53.31 against the dollar in the beginning of the year, the rupee slipped to 57.16, its lifetime low, on 22 June, losing 7.16%. A series of measures by the Reserve Bank of India propped up the local currency to 51.74 against the dollar in October but since then it has lost 4.66% to close at 54.28 against the dollar on Tuesday.
“Nasscom has projected a growth of around 11% for fiscal year 2013 and we are sticking to that,” N. Chandrasekaran, managing director and chief executive officer, said on the sidelines of a Nasscom summit in Mumbai on Tuesday. “For manufacturing, telecom and hi-tech companies, the December quarter is furlough, so it will have an impact on growth.”
Growth traditionally slows in the three months to December for most companies with a presence in the US, the largest market for Indian software firms. The US accounts for over 50% of TCS’ total revenue.
“The US is recovering, post-elections. There’ll be a focus on job growth and economic growth. In my mind, it will do better not only as an economy, but (also) in the tech sector,” Chandrasekaran said.
In February, Nasscom had projected a growth of 11-14% in 2012-13 for India’s $100 billion information technology (IT) services industry, 70% of which is generated from exports.
Infosys told analysts last week that a further moderation is likely in its 5% projected growth this fiscal.
Brokerage Emkay Global Financial Services Ltd said in its 6 December report on Infosys that its discussions with the company indicate that a further moderation in FY13 revenue guidance of “at least 5% dollar revenue growth” to $7.3 billion is most likely, given that decision-making on some of the large deals that the company was expected to close has been affected both by natural events such as Hurricane Sandy and associated delays.
TCS will wait before commenting on client budgets.
“We are in December now, the year is ending,” Chandrasekaran said. “We will talk about it in January.”
In its 5 December report on Cognizant Technology Solutions Corp., IDFC Securities Research said, “Global corporates are experiencing uncertainty on the back of slowdown/recession in key European economies and possibility of a slowdown/recession in the US (fiscal cliff in 2013). It is likely to lead to largely flat IT budgets for CY13 with FY14 being another tepid growth for Indian IT sector.”
Last week, Cognizant’s filing to the US regulator Securities and Exchange Commission (SEC) hinting at growth of around 16%—slower than its previous estimate—sent IT stocks in the red.
Most brokerages expect IT stocks to underperform the Sensex, BSE Ltd’s bellwether equity index, in the next fiscal. In past six months the exchange’s IT index has lost 4.03% while the Sensex has gained 22.16%.
On Tuesday, the Sensex was down 0.12% to 19,837 points and the IT index was down 0.71% to 5,554 points.
“I don’t see the stocks of the entire IT sector doing the same. The sector is in a mature phase where certain players like TCS, HCL and Tech Mahindra will do better than the rest like Infosys, Wipro,” said an analyst with a Mumbai-based brokerage, requesting anonymity.
Chandrasekaran of TCS flagged currency as a concern.
“As long as there is no huge volatility between quarters, we are okay, but we need to keep long-term rupee appreciation in mind,” he said.
Hitesh Shah, Indian telecom and technology analyst with IDFC Securities Research, agreed.
“If there is a gradual rupee appreciation, companies can absorb it but if there is sharp appreciation, then it will affect them,” he said. “We are building in some kind of rupee appreciation in our estimates of IT companies for the next one to two years.”
The local currency has been volatile this year. From a level of 53.31 against the dollar in the beginning of the year, the rupee slipped to 57.16, its lifetime low, on 22 June, losing 7.16%. A series of measures by the Reserve Bank of India propped up the local currency to 51.74 against the dollar in October but since then it has lost 4.66% to close at 54.28 against the dollar on Tuesday.
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