According to analysts, Indian IT giants are experiencing a significant downfall in the growth during this financial year as they struggle with the explosion brought by the Coronavirus pandemic.
Top software giants like Infosys, TCS and HCL Technologies are impacted by the decreased technology spend by the clients based abroad following the lockdowns in their respective nations.
Securities experts at HDFC are expecting revenue drop of the IT industry by 2-7% due to a drop in decision making the next months while businesses are still understanding the impact of the virus which has disrupted the global economy.
Analysts Vinesh Vala, Apurva Prasad, and Amit Chandra said in a note, “We expect revenue in the (first two quarters of this financial year) to be largely impacted by a delay in pipeline conversion and pricing impact on core business.”
Indian software and service exports grew by 8.1% in the fiscal year 2020, making it $147 billion, according to the National Association of Software and Services Companies.
Devang Bhatt from ICICI Direct writes, “In the near future, IT companies could feel the heat of pricing pressure, revenue loss due to lockdown (in India and many countries globally), client bankruptcy and slower client decision making led by lower discretionary spends.”
Indian IT firms might follow Accenture, which reduced its growth forecast from 6-8% to 3-6% because of the COVID-19 impact on the overall business.
Project execution is delayed due to travel restrictions
Largest IT firms in India, Infosys and HCL Technologies give annual forecasts, while Wipro provides quarterly revenue guidance. These companies haven’t yet announced their result dates.
Global travel restrictions are delaying the project executions which is impacting the existing projects and ability to ramp up projects. Moreover, pricing pressure is also building and renewal of contracts is in question for now.
IT firms’ clients are varied in different industries like hospitality, airlines, travel, oil & gas, hi-tech and experts say the IT industry could be affected by China’s economic slowdown.