Overview:
Large cap IT services companies declared their results over the last 30 days. Companies such as TCS, Infosys, L&T Infotech and Mindtree report strong numbers, on the back of growth in their respective digital segments.
TCS and Infosys posted their strongest revenue growth in the last fifteen quarters, with larger order book deal pipelines. However, both companies reported a slowdown in their BFSI segment. TCS’s BFSI segment accounts for 31% of its total revenue and grew 7.7% y-o-y, while Infosys’s BFSI segment, which accounts for c.60% of total revenue, grew by 9.1%. However, digital revenue for TCS grew by over 50%, while that of Infosys grew by 34%.
Mindtree reached its $1bn annual revenue figure and the board announced a special dividend of 200% to mark the milestone. Its digital business grew by c.30% and now accounts for over 50% of the company’s overall revenues.
Wipro reported mixed numbers for FY 19A. Its top line declined by 0.4% y-o-y and EBITDA margins remained flat at 19.1% in FY 19A as compared to FY 18A. Two of its clients entered bankruptcies which impacted its numbers adversely.
Outlook:
Outlook for the overall industry is expected to be sub-10% with slowing discretionary spending, especially in key verticals such as BFSI. Most IT companies still have significant revenues from legacy, on-premise businesses, which is expected to phase out over the next 3-5 years. Pricing pressures from key customers would also have a significant impact on margins.