Tech services firms plough through a fiscal to forget

Cautious clients have cut down discretionary projects, a key profit-driver of Indian IT firms

- Shouvik Das

India's $245-billion information technology (IT) services industry is navigating what could be the worst in the last five fiscal years as cautious clients trim discretionary projects which drive profitable growth for the sector.

On 11 October, Tata Consultancy Services (TCS) Ltd, India's largest IT services provider, reported a 0.3% sequential revenue drop in the September quarter to $7.21 billion. Earnings failed to meet expectations and the leadership sounded cautious. Later, K. Krithivasan, managing director and chief executive, told analysts that there is "client caution over the macro overhang", leading to TCS seeing "reprioritization of spending from discretionary areas to cost optimization".

Infosys Ltd and HCL Technologies Ltd, the second- and third-largest IT services providers, both slashed their revenue growth guidance for the fiscal year. While Infosys cut the upper end of its guidance by 100 basis points (bps) to 1-2.5% in revenue growth, HCL Technologies revised its revenue growth guidance to 5-6% for 2023-24, down from its initial guidance of 6-8%.