Indian IT majors are keeping their fingers crossed as they expect a slowdown in outsourcing orders, delays in tech spending, operational challenges, volatility in the British pound and a domino effect in case other countries follow suit.

With Britain exiting the EU IT sector sees uncertainty in the near term. Infosys, HCL and HCL did not comment as they are in their silent period, ahead of their results.

A Wipro spokesperson said that the company is assessing factors, including mobility of labour, changes in the financial system and the currency. Wipro has been present in the UK for over two decades and has 4,000 people stationed there. “We remain committed to the UK and are optimistic that in the long run it can open up new opportunities for us,” the spokesperson added. Rostow Ravanan, CEO & MD, Mindtree, said: “We foresee uncertainty and reprioritisation of business and IT priorities across companies in this region.”

Nasscom President R Chandrashekhar pointed out that some of the near term impact could be on a decline in the value of the pound, which could result in renegotiation of many existing contracts.

The pound was down more than 10 per cent against the dollar. All the top five IT majors do not give a break-up of their hedged position in the British Pound. However, Tech Mahindra MD & CEO CP Gurnani said that the company follows a long-term hedging policy. “We also expect that the dollar which is approximately 50 per cent of revenue stream will appreciate against the rupee and in combination will mitigate the operational impact on our profitability.” In the short term, the industry believes that currency fluctuations are a cause of concern. “We are likely to see some more fluctuations in the forex market,” said Prabhu Srinivasan, Chief Strategy Officer at Intelenet Global Services, which gets a sizeable chunk of its revenues from the UK.

This may prompt Indian IT companies to establish separate operations for EU, and may lead to some disinvestment from the UK, Nasscom added. While there is talk of investments moving away, on the ground, IT exporters who have relied on the UK as a gateway to Europe are worried about the impact on daily operations. “This could pose several operational challenges to firms, which would increase costs,” said BVR Mohan Reddy, Executive Chairman of Cyient and former chairman of Nasscom. Cyient is headquartered in London and manages subsidiaries in Germany, France and Benelux.

Outsourcing deals

One of the immediate impact areas will be on outsourcing deals. “Discretionary spending will be stopped and a lot of projects will be put on hold,” said Sandeep Aggarwal, a tech consultant who was former CFO with Intelenet. According to Sanchit Vir Gogia, Analyst, Greyhound, there is bound to be pricing pressure on projects.

(with inputs from KV Kurmanath, Ronendra Singh, Rajesh Kurup)

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