The recent Q3 results of the Indian IT services companies namely TCS and Infosys indicate that there is likely to be better growth in the present Q4 quarter and the Q1 of the next FY 2018-19. Experts with whom THE WEEK spoke to feel that digital transformation and the slight improvement in the European and US market may drive some growth for the Indian IT services companies who are mainly dominated by these geographies for their revenue. As per reports TCS’ Q3 revenue improved 1.2 per cent to Rs 30,904 crore from the preceding quarter as its CEO Rajesh Gopinathan said that the firm delivered good results, especially in a seasonally weak quarter. On the other hand, Infosys had reported a 37.6 per cent sequential growth in net profit at Rs 5,129 crore for the December quarter and was higher than the estimates by some market analysts.
“It seems that the overall European market is improving and seems that clients are making decisions and renewing their deals. I see growth in the BFSI (Banking Finance and Insurance) segment in Europe and the US. Earlier, many digital projects were proof of concept projects but those are turning into real projects. The recent US corporate tax rate cut will increase discretionary spending and is a positive trend in the US. Similarly, the Brexit days have settled down and clients are willing to spend. In retail, the brick and mortar stores are really turning into digital online stores in these geographies and that will result in new digital opportunity for the Indian IT services companies. Even in the energy segment, where companies such as Wipro have exposure, there has been some increase in spending due to the revival in the crude oil prices,” Amit Chandra, IT analyst at Mumbai based HDFC Securities told THE WEEK. Chandra further feels that though there would be growth it would be gradual and the real picture would emerge only in the next couple of quarters.
Another expert Kris Lakshmikanth, CEO and founder of Head Hunters India Limited, feel that there has been growth in different economies which may become an opportunity for the Indian IT services companies. “There has been a growth of 3 per cent in the US economy, 2.5 per cent in the European economy. In the near past there were times when the US economy was growing at just 1 per cent annually and the European economy at 1.2 per cent and in Japan, the growth was just 1 per cent. For instance, the Japanese government is forcing Japanese companies towards bringing digital transformation. So compared to the earlier times there has been gradual growth. However, the real growth will come in the digital space and that is the segment where the Indian IT services companies need to focus on. They should also not overlook Indian market which is also witnessing digital transformation and can bring them growth,” said Lakshmikanth.