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 IT biggies may lag industry growth as orders slow dow

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PostSubject: IT biggies may lag industry growth as orders slow dow   Sat Feb 14, 2009 11:30 pm

For the first time in the past five years, big IT companies will grow less
than the industry, going by the growth estimates put out by India’s
main software lobby, Nasscom, as new orders slow down due to the
recession in US. Also, the captives of multinational companies
operating in India would drive a significant chunk of growth rather
than the top Indian IT companies.

National Association of Software Services and Companies (Nasscom) on Wednesday said it expected the software and services export revenues to grow over 16-17% to reach $47 billion this fiscal. But guidance numbers put out by Infosys and analyst estimate of the other major player TCS suggests that these companies will grow below Nasscom’s estimate this year.

While Wipro would go past Nasscom’s estimate marginally thanks to its growth through acquisitions, Cognizant will perhaps be the only player in the top five that would outperform the Nasscom estimate by a good 15
percentage points, if it meets its guidance.


“Top IT companies will grow lesser than the industry for the first time in
years. These companies are over $2 billion in size, and that at level,
they can’t grow at the same levels that they used to before. But their
incremental revenues will be large,” said Sangeeta Gupta,vice-president, Nasscom.

Gartner India’s principal research analyst Diptarup Chakraborti said: “If the data is true, then what it indicates is that the big It companies, which get a lot of business from the Fortune 500 companies are feeling the pinch of the recession much more.”

India’s IT bellwether Infosys, will grow below the industry average for the first time in years, as it has guided 12-13% this fiscal. It gave a revenue guidance of 19 to 21% at the beginning of the year, which it had to revise in subsequent quarters due to the deteriorating economic environment and currency headwinds.

TCS does not provide guidance, but going by its numbers in the last few
quarters, analysts say it is unlikely that TCS would register a 15%
growth in dollar terms. For the financial year 2007-08(FY08), TCS did
revenues of $5716 million, and they have earned $4582 million so far in
the current fiscal. A back of the envelope calculation show that if
they have to register a 15% growth this year, they would have to add
$1990 million in the last quarter, which industry observers say is
difficult in a scenario where clients are delaying budgets and fresh
order flow is not robust.

Wipro, after factoring in its revenues from acquisitions such as Infocrossing and Citos, would grow at 18.49%. Revenues of $3,647.40 million for FY08 and $4322.5 million or FY09, by adding revenues for the year so far with their guidance for the fourthquarter. Cognizant, on the other hand, which follows a calendar year, has given a guidance of 32%.

On whether Nasscom’s numbers were aggressive and overly optimistic compared with the guidance numbers, Ms Gupta said, “The industry is more diversified today and there 4,000 companies out there. And, if you look at the industry, there are a whole segment of multi-national companies, their large captives that are doing very well. Almost 30% of the industry is not tracked by the financial analyst community because those companies are not listed here.”

Nasscom had guided 21-24% growth in July last year, a growth target, which seemed difficult after the sub-prime crisis became more pronounced two months later.
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