Downtime In Tech Town

The biggest, TCS, has revised quarterly projections. Others are taking the same route.

- Arindam Mukherjee

IT was being feared all along, but when earlier this month, India’s largest IT and services company TCS warned of lower earnings in the current year, the spectre of a slowdown loomed over the Indian IT industry. TCS told the Bombay Stock Exchange in a filing that, “Based on data at the end of August 2016, the company has characterised customer outlook as one marked by abundant caution, with some holding back of discretionary spending, particularly in the BFSI (banking, financial services and insurance) vertical in the US, resulting in sequential loss of momentum.” This sent jitters across the IT sector and infotech stocks took a heavy beating.

BFSI clients account for almost 40 per cent of TCS’s revenue, and a sizable proportion of the revenue of all big IT companies too. US and Europe account for almost 80 per cent of the revenues of the $150-billion Indian IT sector. In the last few quarters, the sector has been under tremendous pressure because of subdued growth in these markets.

Following TCS’s cue, IT biggies like Infosys, Wipro, Cognizant and Mindtree scaled down earnings projections for the quarter. Cognizant, too, warned that clients were holding back discretionary spending and cut revenue projections for the second straight quarter. Infosys has already revised its full-year outlook, and will take a relook after the second-quarter results, with the possibility of another revision. In fact, it has announced the cancellation of its contract with RBS Bank in the UK, a fallout of Brexit. These low-earning guidances come on the back of similar bad showing in the last few quarters. In the current quarter, on an average, all the big and medium Indian IT companies have scaled down earnings projections by 6-12 per cent.