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As global economies continue to show strain, the Indian information technology industry is beginning to feel the pinch.
As the BFSI (banking, financial services and insurance) industry takes the immediate impact of the slowdown, contribution to revenues of top IT companies from this segment reflected a flat growth in the June quarter.
Though the contribution in absolute terms showed a growth because of the overall growth in numbers, BFSI’s contribution as a percentage remained either stagnant or decreased year on year. None would say there is a decline in the demand.
What is hitting them is delayed decisions by the clients that are resulting in sporadic deals.
In the first quarter, Wipro’s financial services contribution was put at 26.4 per cent for the June quarter, down from 26.7 per cent the corresponding quarter last year.
It is 43 per cent (43.3 per cent) for TCS and 34.3 per cent (35.4 per cent) for Infosys. But sequentially, TCS showed a growth, Infosys remained stagnant and Wipro declined in this segment.
Bucking the trend
Cognizant, HCL and Mahindra Satyam, however, have bucked the trend and reported bigger revenues from this segment. Mahindra Satyam’s BFSI pie increased by 2 percentage points to 19 per cent (17 per cent) in the quarter. The segment contributed 41 per cent in Cognizant’s revenue, a growth of 20 per cent year on year.
All IT companies witnessed revenue pressure from their BFSI accounts (except HCL Tech) as some of the IT spend coming in from the regulatory front witnessed postponements and even discretionary spends got pushed back, said Ankita Somani, a research analyst (IT and Telecom) with Angel Research.
IT companies derive maximum revenue from the BFSI industry and a weak performance from these accounts due to weaker-than-anticipated acceleration implies industry-wide slowdown in IT spending, she said.
“This segment registered a growth of 12.6 per cent in the financial year 2012 over the previous year, built on domain competencies in retail and corporate banking, capital markets and insurance,” a HCL spokesperson said.
Key trends in financial services segment included an increase in mega deals with vendor consolidation globally, growth in regulatory and compliance mandates and investment in digital channels.
Outlook
The near-term outlook for the industry in this segment seems to be a tough one. “We see a BFSI recovery for Indian players unlikely in the medium term unless the macro environment improves materially. We expect revenue from BFSI to grow slower than average industry growth rate in FY2013,” she added.
> kurmanath.kanchi@thehindu.co.in
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