Nasscom set to cut growth forecast

Nasscom, the country’s software lobby, will revise its growth forecast downward from 10-12 per cent this year. This is after its biggest members such as Tata Consultancy Services, Wipro, Cognizant and Infosys have struggled to grow faster in a more uncertain global environment.

These companies are seeing clients shift to faster adoption of automation, cloud and digital technologies, while cutting on traditional information technology (IT) services. Both Infosys and Cognizant have cut their annual revenue forecast, for these reasons. Nasscom says this is a good indication of where the sector is headed.

“We are fully aware of the number of the short-term factors which have significantly impacted the IT industry. Many of the Q2 (September quarter) results have come; over the next two weeks, we expect all the results to be with us. Then, we will share our revised guidance (expectation),” said R Chandrashekhar, president of Nasscom, on Wednesday. “It is fairly clear we have to revise it downwards.”

In April, Nasscom projected the $108-billion, export-focused software and back offices industry to grow 10-12 per cent this year. India’s IT services companies have spoken of ramp-downs by clients in banking and financial services, and health care, a major revenue generator for them. HCL Technologies is the only company that has shown a reverse in this trend.

Some also expect the industry to see a turnaround, with measures to improve the operating margin and offset the pricing pressure with better utilisation in key areas. The slow growth is a temporary blip, argues former Infosys co-founder S Gopalakrishnan.

"The industry has a long road ahead. It is large, mature, it has depth of talent, depth of leadership. The industry is financially strong, hugely profitable," he said in an interview. "It is growing faster than any IT industry in any other part of the world."

The top listed companies have combined cash reserves of over Rs 1 lakh crore, accumulated over the years by being conservative and protecting their margins. With this, a few companies (Wipro is one) have acquired companies to fill gaps in its expertise. Infosys and Wipro also have earmarked funds to acquire stake in start-ups that give them exposure to emerging technologies and sectors. This helps them to also be flexible on newer business models.

The top listed companies have combined cash reserves of over Rs 1 lakh crore, accumulated over the years by being conservative and protecting their margins. With this, a few companies (Wipro is one) have acquired companies to fill gaps in its expertise. Infosys and Wipro also have earmarked funds to acquire stake in start-ups that give them exposure to emerging technologies and sectors. This helps them to also be flexible on newer business models.