If the first quarter of 2013-14 had set the pace, the second quarter results from July to September brought back confidence for Indian IT majors as the big four — Tata Consultancy Services (TCS), Infosys, Wipro and HCL Tech exceeded market expectations with their quarterly incomes.
Analysts tracking the sector believe that the revenue stream will remain healthy as discretionary IT spends is back for US-based companies in the banking, financial services and insurance sectors.
The discretionary IT spends offer a good barometre for a client firm’s IT spends pattern such that it ultimately translates into more number of outsourcing deals. This is important as US-based banking, financial services and insurance firms still account for more than half of revenues for Indian IT firms.
“Apart from the US, the demand environment (for IT outsourcing deals) is looking positive in Europe as well,” said Ankita Somani, IT analyst at brokerage firm Angel Broking. An increase in discretionary IT spends augurs well for Indian IT firms, Somani added.
Wipro chairman Azim Premji said there are positive indicators on the global economy that coupled with the client confidence is reflecting on the company’s performance.
“We see the discretionary spend getting better every day. The market looks good and demand is robust and we feel that we have good opportunity,” said N. Chandrasekaran, CEO, TCS.
Anant Gupta, chief executive officer, HCL Tech, said deals from both the US and Europe are very strong and well balanced. “We see good momentum across financial and manufacturing sectors in the US and Europe... and this continues to reflect in our portfolio."
Even Wipro and Infosys that had been struggling offlate managed to beat market expectations, wherein Wirpo reported its best profit growth in the last seven quarters and Infosys raised its revenue outlook by a notch.
India’s largest software exporter, TCS, proved once again that fast growth is possible with a huge base as well. At `4,702 crore, the company’s net income rose 34% during the July-September quarter.
And this high growth is expected to reflect on the hiring front as well. TCS has already announced that it would hire 5,000 more than its original plan. Infosys, Wipro and HCL Tech did not give specific numbers but said that hiring will be in sync with the demand environment.
However, analysts cautioned that the October-December quarter might be relatively subdued due to the seasonality effect of furloughs and holidays.