Despite being top-tier companies, TCS and Infosys have missed street estimates due to global uncertainties, which has set a subdued tone for the IT pack's Q4 show. As a result, experts predict that the industry may experience choppy for the next 1-2 quarters. However, they remain optimistic about a subsequent recovery, PTI reported.
The Q4 earnings season started on a gloomy note as the scorecards reported by TCS and Infosys failed to meet market expectations. The management commentary from the top two IT services companies in India was marked with a sense of caution regarding the present customer sentiments across various verticals like BFSI, technology services, and certain others, particularly in the US, the report said.
Infosys's top brass spoke of "unplanned project ramp downs and decision-making delays by some customers," and Tata Consultancy Services (TCS) talked of some clients deferring newer, non-critical initiatives, it added.
In its earnings preview earlier this month, JP Morgan said that Indian IT companies' Q4FY23 prints should be weaker than Q3 with constant currency sequential organic growth slowing due to a deteriorating macro and flattish to declining margins.
Industry veteran and former Infosys director T V Mohandas Pai was quoted as saying in the report. “The Q4 FY23 will be subdued for IT players, but the extent and impact will depend on the profile and strategy of individual companies.”
Pai believes uncertainties in the US market are likely to come down in the April-June quarter, and that new work will take 1-2 quarters to come by, so "October-November will be a better time".
"Five years back, the Indian IT companies were much smaller, they were samples and not the universe, now they have become the universe," Pai told PTI.
The industry is today a greater force with $200 billion in exports, and the top 5 Indian IT companies are big players in the global market.
ICRIER Chairperson and Genpact founder Pramod Bhasin asserted that while the "softness" in earnings from the big IT firms is likely to continue for a few quarters, growth will return thereafter.
In recent years, the tech industry has been a huge consumer of IT services as well as outsourcing. Some of that will and has definitely slowed down," Bhasin pointed out.
IT sector expert and chairman of 5F World (a platform for digital startups, skills, and social ventures) Ganesh Natarajan says the biggest customers of Indian IT have been BFSI (banking, financial services, and insurance), who are also highest on the digital maturity curve.
"The slowness in this segment is likely to mute growth for IT over the next three to four quarters," Natarajan believes.
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