IT firms’ deal pipeline remain strong despite tough macros 

Even as macroeconomic headwinds continue to hamper the demand environment, deal pipelines for the Indian IT companies continued to strengthen in the fourth quarter. Companies are banking on the deal wins to drive growth next year, while analysts opine strong order book does not necessarily indicate impending growth. 

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IT major TCS saw its order book total contract value(TCV) rise from $8.1 billion last quarter to $13.2 billion, led by mega deals. Similarly, Infosys’ large deal TCV stood at $4.5 billion in Q4, higher than the $3.2 billion recorded last quarter.

For Wipro too, total bookings stood at $3.6 billion, marginally lower than the $3.8 billion signed last quarter. Large deal bookings, however stood at $1.2 billion, higher than $0.9 billion last quarter. 

CEO insights

K Krithivasan, CEO, TCS, said, “The number of deals that we have been winning in the last few quarters, gives us confidence that after a period, the growth would return. We are quite comfortable with the revenue conversion of the deal that we signed in the last three, or four quarters. The conversion rate has been at a similar rate that we used to convert in the past as well.” 

Similarly, Salil Parekh, CEO, Infosys said, “We see discretionary spending and digital transformation work at the same level. The focus is on cost efficiency and consolidation. Our large deal wins in FY24 will help us in FY25.” He also noted that the outlook for the financial services vertical is better for next year than the current year and the growth for the manufacturing vertical will be slower.

Analysts opine the current high TCV does not necessarily indicate impending growth. Pareekh Jain, CEO at Pareekh Consulting and EIIRTrend, said, “In the recent quarters, deal win has been strong but revenue growth is varied. This could indicate challenges in converting deals or potential revenue leakage, with companies simultaneously losing deals and some customers opting for competitors.” 

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The deals being won are for cost optimisation and transformation, which typically span for longer durations. Therefore, focusing on Annual Contract Value (ACV) rather than TCV could provide clearer insights into revenue conversion. However, companies haven’t disclosed ACV figures, he added. 

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