Due to the COVID-19 lockdown in the quarter to June, Indian IT firms will face the complete impact of business hindrances in the US and Europe.
According business analysts, companies will report a 5-10 per cent drop in their revenue due to the covid-19 lockdown, which will induce various clients to cancel or put off their expenditure on technology for a couple months. Various other sectors have already declared bankruptcy and loss. Including those in the travel sector, oil and gas, and so on.
“(It) is a washout quarter that captures the full impact of uncertainty in business from Covid-19 led by lockdown, supply side compression and demand pullback. We expect retail, travel and transport, hospitality and oil & Gas verticals to be severely impacted and do not expect recovery in Q2 also,” wrote Aniket Pande, IT sector analyst, in a report. “We expect the revenue trajectory to show resilience in Q2FY21 before starting growth (<+1 QoQ USD growth) from H2FY21.”
TCS, India’s largest IT services, will be declaring its first quarter results on July 9, and Wipro on July 14. TCS is expected to see a drop by 6 per cent, Infosys by 5 per cent, Tech Mahindra by 9 per cent, HCL Technologies by 8 per cent, Wipro by 7.5 per cent among some of the major Tech giants.
Despite these companies’ steps to cut costs, they will be losing their profits says IT analyst Madhu Babu.
However, analysts believe that some segments of business, including Banking and financial services industry (BSFI), healthcare, and non-discretionary sectors will recover faster than the others. In a report, William O Neil India, investment adviser, wrote, “BFSI expects a strong opportunity for cloud, data services, and new digital bank capabilities after the pandemic. In April, JP Morgan released its annual report for 2019. The company disclosed that it would increase its technology spends by 4% versus the last year, despite the pandemic. Of this, 50% would be dedicated to ‘new’ capabilities.”
Despite these predictions, the revenue generated by Accenture last week has shown that many clients are spending on technology and digitalisation. Hence, this is expected to be a short term impact. Infosys CEO, Salil Parekh said that while the companies might have to sustain a short term impact, they can be confident of growing faster in the medium and long term.
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