The country’s $50-billion software services export sector, which has been in the doldrums following the global economic crisis, could expand by 15-20% next financial year on the back of improved demand. This would be three times the 4-7% growth that industry body Nasscom predicts for the current fiscal.
Though Nasscom is slated to formally release its projections for next fiscal on Wednesday, top IT companies’ CEOs like S Gopalakrishnan of Infosys Technologies (INFOSYS.BO : 2352.2 -71) and Girish Paranjpe of Wipro (WIPRO.NS : 644.05 -11.15) told FE they expect growth in the 15-20% range next fiscal. This is in line with Nasscom’s forecast of double-digit growth in 2011-12, although the body has not furnished specific numbers so far.
Although most clients of Indian IT firms are yet to firm up their technology spends, Gopalakrishnan said initial indications were that budgets would be up 4% next year. “Even the offshore component in deals will be slightly up,” he said.
This is major change in sentiment. Hitherto, Infosys had said it expects IT budgets to remain flat or marginally down next year. The country’s second-largest software firm reported a 3.6% drop in net profit for the quarter ended December 31 at Rs 1,582 crore. Currency factors contributed to the decline.
Girish Paranjpe, joint CEO of Wipro’s IT business, said though his company does not provide a full-year outlook, “Growth is on track thanks to a mix of both large and small deals.” The country’s third-largest IT firm reported a 21% rise in consolidated net profit to Rs 1,217 crore, compared with the corresponding quarter in the previous year.
The country’s largest software firm, TCS, however, saw the most significant rise in December-quarter net profit-33% year-on-year–at Rs 1,824 crore.
Most technology companies, including mid-tier firms, posted robust results for the third quarter thanks to a recovery in key markets such as the US and in key verticals like financial services. While the recovery was earlier restricted to deals emerging from mergers & acquisitions in the banking space, the growth in volumes is more broad-based now with the exception of telecom and manufacturing, in some cases.
“The demand environment is better than before; confidence is back in the market and we believe the worst is behind us. All our clients have delivered good financials in the third quarter and we expect decision-making to be faster now,” said Gopalakrishnan.
For the next financial year, Paranjpe added that the industry’s growth could be around 14-15%, the basis of which is a poll of IT companies’ outlook conducted by Nasscom about two months ago, he said. Though a Nasscom spokesperson said it conducts several such surveys a year, she refused to authenticate the numbers.
Meanwhile, Gopalakrishnan said Nasscom projections are usually higher than the industry’s as they also take into account growth in captive units, which often register a much higher growth than their third-party peers.