Live
- BCCI inaugurates new National Cricket Academy in Bengaluru
- Bihar flood situation critical amid heavy rain, says Shahnawaz Hussain
- Russia downs 125 Ukrainian drones
- Kerala: Independent MLA PV Anvar booked for 'inciting terror'
- Prashant Kishor says new political party to launch in Bihar on Oct 2
- China Open: Buyunchaokete upsets Olympics bronze medallist Musetti to make QFs
- Cambodia offers free bus services for Pchum Ben festival
- Two dead, three injured in Afghanistan road accident
- Times have changed: PM slams previous govts for lack of vision, planning for development
- Case filed against MP Afzal Ansari over marijuana remarks
‘Slow BFSI spending to hurt Q2 performance of Indian IT firms’
However, with challenges in the banking, financial services and insurance (BFSI) vertical and client-specific issues weighing on growth, Tier-I IT vendors like TCS and Infosys are expected to deliver tepid-constant currency growth in the second quarter.
New Delhi : Weakness in the financial services sector as well as project delays and cancellations may impact the pace of revenue growth of Indian IT companies in the second quarter of the current fiscal, say industry analysts. Traditionally, the July-September quarter is one of the better quarters for the $110-billion Indian IT sector, witnessing strong sequential revenue growth during the period.
However, with challenges in the banking, financial services and insurance (BFSI) vertical and client-specific issues weighing on growth, Tier-I IT vendors like TCS and Infosys are expected to deliver tepid-constant currency growth in the second quarter.
“The seasonal strength that leads to the strongest sequential growth in the September quarter is hardly expected to play out this time, as slowness in spending by the BFSI vertical weighs on the industry. In dollar terms, the growth will be pegged back further by sharp depreciation of the GBP (pound) Vs the US dollar,” Motilal Oswal said in a report.
Slowdown in the growth, rupee strength and investments will lead to the toning down of margin expectations by companies, Kotak Institutional Equities said in its report. “The Second quarter of 2016-17 will be the weakest September quarter for Indian IT in the past eight years. We expect Tier-I IT to report constant currency revenue growth rate of 0.5-3 per cent, quarter-on-quarter. We forecast crosscurrency headwind of 50-100 bps for Tier-I IT due to the depreciation of the GBP,” it said, adding that the firm expects some cut in the growth guidance.
Analysts are also of the view that the sector’s growth in FY2017 will be constrained by broad-based weakness in the BFSI vertical, elongated decision cycles given the macro-uncertainty and a weak pipeline of large deals and likely lower discretionary spending.
We see FY17 to remain a challenging year both on growth and margins,” Centrum said.
The country’s largest software services player, Tata Consultancy Services (TCS), has already warned that its financial sector clients in the US were holding back on discretionary spends, leading to a “sequential loss of momentum”. Infosys has also hinted that it may slash its revenue guidance for the second time this fiscal, stung by “risks” like challenges in the banking and financial services sector and cancellation of projects.
